Invest Like the Best with Patrick O'Shaughnessy - Gavin Baker – Tech and Consumer Growth Investing - [Invest Like the Best, EP.149]

Episode Date: November 26, 2019

My guest this week is Gavin Baker, the founder, and manager of Atreides Management. I met Gavin in the same way I meet many of the most interesting people, on twitter. His focus is on consumer and technology growth investing, which is the topic of our conversation. We discuss many of the largest trends in these sectors, several fascinating investment cases, and also explore the videogame industry in detail—which I found especially interesting. Please enjoy my conversation with Gavin Baker. For more episodes go to InvestorFieldGuide.com/podcast. Sign up for the book club, where you’ll get a full investor curriculum and then 3-4 suggestions every month at InvestorFieldGuide.com/bookclub. Follow Patrick on Twitter at @patrick_oshag   Show Notes 1:16 – (first question) – His unique view on the markets 4:00 – Distilling Apple as a growth investment 6:44 – What is the most important lever for Apple looking forward 9:01 – His view on Intel 11:03 – Most important technological changes that may dictate his investing strategy 16:20 – How do you look at a big idea, like AR, and then apply to an individual business             18:21 – Fortnite isn't a game, it's a place             18:26– Fortnite Is the Future, but Probably Not for the Reasons You Think 18:56 – His insight into video games and their ability to control attention 28:36 – How do you invest in the gaming sector 40:06 – Favorite video games 32:07 – Why gaming and customer sector allows him to find Alpha richness 34:17 – Being in the top 1% of knowledge before investing in a company 36:24 – His view on value investing today and, in the future, 41:15 – Increase of regulatory capture  42:01 – Headwinds to the tech companies today 43:50 – Thoughts on the Chinese internet market and how it impacts US markets 45:36 – How often companies look at China for ideas 46:21 – Role of alternative data in his process 49:36 – Big trends today we should be paying attention to 54:20 – the most interesting company he does not own 58:48 – Advice for new investors 1:00:17 – Non-obvious tech resources - TechMeme 1:00:50 – Favorite sci-fi character 1:01:19 – Kindest thing anyone has done for him   Learn More For more episodes go to InvestorFieldGuide.com/podcast.  Sign up for the book club, where you’ll get a full investor curriculum and then 3-4 suggestions every month at InvestorFieldGuide.com/bookclub Follow Patrick on Twitter at @patrick_oshag   All opinions expressed by Patrick and podcast guests are solely their own opinions and do not reflect the opinion of O'shaughnessy asset management. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions. Clients of O'shaughnessy asset management may maintain positions in the securities discussed in this podcast. Clients of the podcast guest’s firm may also maintain positions in the securities discussed in this podcast.

Hello and welcome, everyone. I'm Patrick O'Shaughnessy, and this is Invest Like the Best. This show is an open-ended exploration of markets, ideas, methods, stories, and of strategies that will help you better invest both your time and your money. You can learn more and stay up to date at investorfieldguide.com. Patrick O'Shaughnessy is the CEO of O'Shaughnessy Asset Management. All opinions expressed by Patrick and podcast guests are solely their own opinions and do not reflect the opinion of O'Shaunsi Asset Management. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions. Clients of O'Shaughnessy asset management may maintain positions

and the securities discussed in this podcast. My guest this week is Gavin Baker, the founder and manager of a tradies management. I met Gavin in the same way I meet many of the most interesting people on Twitter. His focus is on consumer and technology growth investing, which is the topic of our conversation. We discussed many of the largest trends in these sectors, several fascinating investment cases and also explore the video game industry in detail, which I found especially interesting. Please enjoy my conversation with Gavin Baker. So Gavin, this is going to be really fun. The way that you invest, I think, is one of the last interesting ways to do public market investing. So I'd love you to begin by describing what is unique about the way that you view markets, maybe growth, tech, and

consumers specifically, and why you do it this way. I'm a student of history. And I think we are living through a period of accelerated change. The only comparable period in history, I think, is the Industrial Revolution. You and I both like Carlotta Perez, and I would argue her work and kind of history suggests that we have another 30 to 40 years of rapid and powerful disruption ahead of us. And in some ways, I think of the invention of the microchip in 1959 has being, or the integrated circuit, is being analogous to James Watts' invention of the rotary steam engine in 1761. But I would argue peak economic, political, social change as a result of that invention was 70 to 100 years later during the peak of the Industrial Revolution 1820 to 1850. So I think in some ways we may be

just entering peak disruption. And with that lens, I try to invest at the edge of disruption just before it. I approach public equity markets. I think a lot of people say this, but like a private equity investor, like a business owner, always looking out five to seven years and trying to own very high RIC companies with growing competitive advantages, owner-oriented management teams who are on the right side of disruption. And what I try to do, sometimes successfully, sometimes unsuccessfully, is looking out five to seven years by these businesses at what I think is a 20 or 30% free cash flow yield to the EV. It's critical in growth investing to assume multiple comprehensive it doesn't always happen, but you want to be paid based on business outcomes and assume

valuation is not part of the outcome. That seems like a key part here is that over some long enough time scale, I'm curious why specifically five to seven years, I'm sure there's thought behind that. Over some minimum time scale, the only thing that matters is the business growth, not valuation changes. That gets muted as time goes on. I think that's part of the reason, but why specifically five to seven years? Five to seven years, I think, is as far as I can convince myself that I can look out and have a differential view on a future state, something that I can have conviction in. And yeah, for sure, in the short term, valuation dominates price movement. But the longer you go out, the less important valuation is. And I would always modify,

it's absolutely true that the price you pay that determines the return you get. But I would modify that statement by saying the price you pay determines the return you get for a given business outcome. No matter how cheap it is, if it goes bankrupt, you're at a zero. Yep. So we're going to tons of individual company examples here because I think when you're thinking about that five to seven year period, you've often honed in on it. I'll call it like most important question or single variable, which really is going to drive that cash flow growth for an underlying business. So maybe we'll start with one I've seen you talk about publicly, which is more current, which is Apple. So if you're thinking about Apple as a growth investor, what is that sort of distillation

and how did you arrive at it? Apple was actually kind of foundational, I think, to the way I evolved as an investor. I think a lot of people when they start as fundamental investors, they're looking for earnings or free cashful estimates can be revised up and the multiple can grow. And then you can convince yourself. You get paid twice. Yeah. And that's exciting because you feel like, hey, there's 100% upside over the next 12 to 18 months. I realized a couple of things over the years. One, that's a very efficient and competitive time horizon. Two, almost certainly any company where you can convince yourself that it can double in a 12 to 18 month time horizon

has a lot of risk to it as well. There is some sort of efficient frontier, full stop. Return and risk are related, so if you can intellectually convince yourself that it can double in 12 to 18 months, it's probably very significant risk. And over the years, I gravitated towards looking for companies

where I could bet on multiple compression, look out several years, and get paid on the business outcome. Apple, I think, was pivotal to that. I'll never forget, This was in 2007, maybe early 08. I was at lunch with a group of former colleagues and my friend Sunu Kalra. We were debating the Apple quarter and they were going to report in two weeks.

And it was something like, where they're going to sell 850,000 iPods or 900,000 iPods. Everybody had a very nuanced view based on Asian supply chain data points and how things had been trending and the product cycle. And Soto just said, you know what? I don't care about any of this. Sony sold 400 million walkments. and I think Apple's going to sell way more iPods than Sony ever sold Walkmans. And as soon as I heard that, it's like, wow, it really doesn't matter. Apple went on to be 7x, 10x, 15x from there.

I actually don't know that they actually ever ended up selling 400 million because it got subsumed into the iPhone, but it was directionally accurate. And that kind of set me on this path of finding a mental model or a framework that would let me look out a long time and have confidence in forecasting, out a long time. Occam's Razor, it's very powerful for science, but it's also powerful for forecasting. Simple is beautiful. If you can find a simple framework like that, that gives you the conviction to, A, look out and B, hold through the periods of volatility that a lot of growth companies go through. Apple's a much different business today than when you guys were having that conversation back then.

As a much more mature business, one that seems hyper-efficient, you know, Tim Cook, famously a supply chain guy by background, What now is, do you think, that most important level or Occam's Razor model for Apple and its business looking out five to seven years? There are three. One is, I think the price to used iPhones is critically important to Apple's business model. Why is that? Used iPhones retain their value much better than used Android phones. When you trade in your phone, you capture that. That lets the used iPhones retain their value better, supports a dramatic price premium for Apple.

Because when you're paying $1,000 for an Apple phone, if you're trading in your phone, if you're trading in your phone, in a 18-month-old phone, chances are you're getting $400, which means you're really only paying $600. That comparable Android phone is being traded in for probably $150, which means you're paying $850. So Apple can charge the consumer more than its competitors, but actually have a lower effective price to the consumer. The second thing that's happened is the iPhone is becoming an edge server of sorts for wearable devices. You know, to go back to the 1990s client server, I think we're all going to have this constellation of wearables. We have the phone now. We have the AirPods.

We are eventually going to have augmented reality glasses. And so the attach of those wearables, I think, is an important variable. And then the third thing that I think is critically important, there were two really important things that happened in 2018, only two in technology. technology. The first, which doesn't pertain to this, is Intel losing its manufacturing lead. The second was Apple hiring John Gendria, who is the head of search at Google. And this meant to me that Apple had a chance. Apple is one of arguably two companies, Apple and Facebook, that could be a competitor to Google over some period of time. To compete with Google and search, you need a differentiated data set. Facebook and Apple both have that. And Apple, they had a series of beliefs

about privacy that made it unlikely in my judgment that they were going to succeed. And hiring John G. Andrea, A, I don't think he would have gone there unless there had been a tectonic shift beneath the surface in Apple's views on privacy. And B, it meant that they had a chance. What about the story behind Intel? I can't let that one go. Intel for the last, I don't know, 50 years, 60 years, always got to the next node in semiconductor manufacturing first. And this is Moore's Law, price performance, you know, doubles every, you know, it's slowing down. So who knows? The rate at which Moore's Law is improving is very controversial right now.

But nonetheless, being to the next node first is a big advantage because you can choose, you can have a faster chip, you can have a more power efficient chip, or you can have a smaller chip that costs less money. Intel always got there first. And let's just say if they got there six to nine months on average before their competitors, if you do the math on what that means, it meant they had a 15 to 20 percent embedded advantage. And in 2018, and it's important that the Taiwan Simi 7 nanometer node is equivalent to the Intel 10 nanometer node. There is a terminology difference for marketing purposes.

But Taiwan Simi got to the node before Intel, which meant that Taiwan Simi, who supplies, most semiconductor companies that you can think of, the semiconductors that go into Apple, you know, the world has really gone fabulous with the exception of Intel and memory companies and meant that that universe of companies had that 10 to 15% advantage. So that's call it a 20 to 30% swing in competitiveness. In modern semiconductor manufacturing, it is the closest thing to magic in the real world. We are manipulating atomic particles. it is amazing what is happening.

It has much art has science. And the reason that Intel had that lead so consistently is it's almost like cooking where you come up with a recipe for the new note and you have to test it and iterate and it depends on what you did before. And just like a cook needs to see what the brownies taste like or the cake tastes like

and hone in on the exact right recipe, that is modern semiconductor manufacturing. There is an element of art in making bets and trial and error. What are, do you think, the most important of these major technological changes? So you've written a little bit about, obviously, the one that started in 1959, but I'm curious whether or not you would classify something like mobile or artificial intelligence or crypto or fill in the blank as like the next important platforms, because those then become, I assume, sort of the waves that you want to ride as a growth investor in individual businesses. Are those kind of the big three?

Yeah. And it's one reason we would back and forth a little bit on Twitter over. the Carlotta Perez framework, and I would argue that it's not just the semiconductor, but you've had the semiconductor, the internet, and then mobile, and now artificial intelligence. And each one was kind of requisite for the next. And it happened in a very unusually fast time frame. If you look at the spread between the rotary steam engine, canals, railroads, steel mills, and then you'd go all the way into mass manufacturing. It happened over a dramatically longer period of time. But you obviously needed the microchip for the internet. And then you needed the internet mobile phones, truly useful because being able to access the data centers where all the content is stored is a big part of what made them useful.

And they needed the mobile phones to be foundational for artificial intelligence because they generated the data that is needed for AI. The training set, yeah. Yeah, there's been almost no advances in technology or algorithms. The only thing that has enabled the AI revolution that we're living through, which I think we're at the bottom of the first inning in, is. one, we had the ability to do cloud computing, so just apply significantly more computational power to old algorithms, and then B, we had dramatically more data. And that data actually generally came from mobile phones.

Within that, there's a lot of things that are exciting. I think augmented reality and virtual reality are going to be very important. I think virtual reality, you may need brain computer interfaces to really unlock it because it's very difficult to solve the nausea problem. So if you're in a virtual reality and you're walking in that reality and your body isn't walking, a lot of people feel nauseous. This is why I think the great VR experiences today are either games where you're in a spaceship, a pilot, piloting an airplane, or you're in a car. Are there in one of these new startups sandbox VR where you actually can walk? Air, I think, will happen sooner.

I think autonomous vehicles, this is kind of, I think, going to be the first applied application of AI that's going to have a dramatic. impact on the world. It's always important to think laterally. AVs may have a bigger impact and create more value or redistribute more value in the worlds of retail, real estate than they do within the core automotive industry because they're going to have seismic impacts on those industries. Based just on ease of access. So you've had this huge trend towards people moving back into the cities because they want to be able to walk around. People don't like long commutes. But if you can get in your car, leave whenever you want, go to sleep. mess around on your phone, the idea of living an hour away from a big city in a beautiful

suburb with a big lawn might seem very different. Retail, it's going to have the balance between e-commerce and physical retail, the efficiency of distributing goods between AVs and drones, I think it would really change the relative economics of both of those businesses. And then I'm also excited within the virtual reality, which I've written a lot about is the metaverse. I think it is inevitable that a majority. majority of people will spend a majority of their waking hours in virtual worlds within our lifetimes. And I think that's semi-inavitable. It's a linear extrapolation of current trends. Yeah, what's the average phone time? I mean, just the phone time alone today. Like,

you could argue that kind of is that, just a crappy version of it. A crappy version of it. Although you're looking at a real-world events. Maybe you're watching sports, you're reading news, you're communicating with your friends. You know, I would say a subset of that is kind of my definition of a virtual world. And when I think people spend a majority of their time in virtual worlds, that is the metaverse. And why video games and virtual worlds have been taking share of consumer time and engagement for a long time.

Why is that? To put numbers on that, these are in the John Maynard Keynes. I'd rather be vaguely right than precisely wrong spirit. The UK government authority keeps pretty good stats on the sales of video games, music, and movies in the United Kingdom. And I think 20 years ago, video games were sub-5%. of that combined bucket. Today, they're a majority. The reason for that is, I would argue, you can't make a movie that is better than Empire Strikes by Godfather 2, Deer Hunter. Those are all

movies that were made 35, 40 years ago. I love classical music. I would argue nobody's ever going to make better music than Bach Beethoven or Mozart, Chikovsky, 300 years ago, is on average. Whereas a video game today is incomparably better than a video game from even 15 years ago. It's the only form of engagement that's writing Moore's law. So that's why they've been taking share. And then if you just extrapolate that linearly, that's going to continue until virtual worlds are indistinguishable from real life. Why go watch the HBO series Rome when you can go be in ancient Rome? Yeah.

Yes. Absolutely. So how do you take this general extrapolation or trend that's likely to happen in your view and think about it through the lens of individual? businesses. So maybe we could take AR. I know Apple has come out and said that by 2022, they'll have glasses or something like this. How do you then take the big idea and shrink it down to the portfolio size, you know, actual implementation? Within AR, if I am right that mobile phones are going to become edge servers. Edge servers. I love that. Yeah. I've not heard that before. I actually think I got it from somebody named Brian Norgard on Twitter. I know Brian. Yeah.

I feel like I don't have all that many great ideas of my own, but when I hear a good idea, I can instantly identify it and write it for a long time. So I think that came from Brian Norgard, who I've actually never met, but love his tweets. So AR, I think if the phone is an edge server, it is highly likely that the dominant phone operating systems will be the dominant providers of augmented reality at a platform level, whether it's platform or aggregator. She used the Ben Thompson terminology. Within virtual reality, it's fascinating. A lot of people want to control the Metaverse, be the platform provider for this. You've seen Facebook, and by the way, I should reference that we're involved in various ways

in a lot of the companies we've discussed. Facebook, they brought CTRL Labs, which is one of the providers that bring computer interfaces. They bought Oculus. They missed the mobile phone platform revolution. They want to have a platform play in VR and AR. And if I'm right about edge servers, it could be hard for them in AR. They're making all these moves in VR. What is fascinating is that I think it is a semi-inavitable that the platform layer in the metaverse in the oasis,

you know, to pick either William Gibson or Ready Player 1 terminology, they're going to be video games. If when you're going to go into the past, you're going to go into an Assassin's Creed game. When somebody wants to indulge a soldier fantasy, whether it's going to be Call of Duty or if you want a lighter weight fantasy, that's going to be Fortnite. And this is already happening. Owen Williams, I believe, wrote a great article called Fortnite is a game, not a plighter, Matthew Ball wrote a great article on Fortnite, basically being the first true instantiation in some ways of the metaverse. Video games, this is something that if you look out five, seven, nine years into that hazy

edge of intuition, this is a semi-realistic outcome that the dominant video game franchises today become the platforms within the metaverse, and they're all linked by some sort of substrate. That's part of how I try to put it into the portfolio today. Can we talk more about video games specifically? So the landscape, the key players, the rising market share, I think Matthew Ball has done an awesome job. I'll convince him to come on here at some point. Hopefully he's listening. The growth is spectacular. But I also think you have a fundamental market insight here that's similar to your insight from the early days on just Facebook and its control of your attention being much higher than it's controlled ad revenues. And maybe

there's some analogy, but maybe tell that original insight. and how that might apply to video games today. So I think Facebook was in some ways the first time I really put that kind of Apple framework where you have a really powerful long-term insight into effect. So I looked at Facebook, and it's amazing. This was 2012. The stock had gone down 50% after its IPO. Mary Meeker published her annual slide deck, which is great.

I've never met Mary, but wow, has she been important to my career? And she added on her slide deck that the internet, mobile and desktop, they used to break it up, was I think 35% of consumer time spent 23% of advertising revenue in the United States. And as a student of history, I know that any time a new format comes out that engages consumers, the advertising revenue always follows with a lag. So radio comes out, a lot of consumer time and attention switches away from newspapers. it actually takes a long time for the 15 and 30 second radio ads to be standardized, for advertisers to become convinced that there's an ROI. But eventually, in a similar linear fashion, ad dollars moved to radio. And then TV comes out and consumer time and attention shifts probably even more dramatically

than it did with radio. The first TV ads were basically repurposed radio ads. And it took a long time for advertising dollars to catch up. So we were living through this with the Internet. And so I was very confident based on nearly 100. years of history, that that 23% of advertising revenue would go to 36% of that. And then for Facebook specifically, Facebook was roughly 7% of consumers' time spent across all mediums in the United States. And it was just under 4% of advertising dollars. So it was 5 billion in 2012. And so I was very

confident, hey, I can underwrite to 11 billion in U.S. ad revenue, just based on that one really simple mental model, and then I can extend that to the rest of the world, which is a $550 billion ad market. You get to something like, hey, their fair share should be $35 billion. That seemed conservative to me because there's a couple of important adjustments that you need to make to that. First of which is search spending is not ad spending. Search spending is just demand fulfillment. You're not creating consumer intent. You're not generating demand.

You're fulfilling demand. It's the digital equivalent of slotting fees. And slotting fees, if they could be measured precisely, would be dramatically higher than they are. You can just measure search in a way you can't measure slotting fees. Anything you can measure generally gets, in some ways, it may be overvalued in today's Internet world. And slotting, just so people understand, might be like where something sits on a shelf and a store. Absolutely. Eye level is worth a lot more than the bottom shelf.

And people have been paying slotting fees for a long time. And there's digital equivalent. Yeah. The second adjustment that you could make to that $35 billion was, hey, Facebook, it will be dramatically more measurable than any other non-internet medium. At the time, it's amazing. In 2011 to 2012, print advertising was bigger than the internet advertising. The world, it changes very fast. But you can measure, you know who someone is, you know their interests, you can serve the ads that are more target. And theoretically, those should be a lot more

valuable. And so the internet should, internet advertising should actually punch above its weight. And then the third adjustment that I thought about is I thought it was pretty clear that the online economy, so to speak, would be significantly more advertising intensive than the offline economy. Many years later, it became very popular on Fintwit, and it's a great way to frame that idea up, which is just KAC is the new rent. Customer acquisition cost, online ad spend. It's not just replacing other forms of ad spend. For a lot of businesses, it is replacing rent. Storefronts. Yeah.

And what is the global market for rent? So I thought without making any of those adjustments, you could get to this $35 billion revenue number for Facebook. We put a 50% even margin on that, tax it at 20%, 14, 15 billion dollars in free cash flow. And I think the stock had an EV of 30 to 35 billion. So I'd been buying it in 2012. And then Mark Zuckerberg at TechCrunch Disrupt said, hey, I am 100% confident that our mobile ads, our newsfeed ads, are going to be dramatically more valuable than our desktop ads. because we have so much more telemetry about the user. We know their presence.

We know their identity exactly. We know if they're looking at the screen. They're just going to be more valuable. So that's slotted into this model, and I made Facebook a big position. With video games, I think there's a couple of things. So first, the global video game population has more than 10x over the last, call it, 10 to 15 years. And the reason for this is twofold. One is the video game industry used to only have.

have one point of entry, and that was Nintendo and arcade games. The iPhone was a new point of entry that was dramatically more widespread than Nintendo's arcade games ever would be. And then now you've had Fortnite is a third point of entry. But so the population has grown dramatically, but it's still, I think, less than a third of the people. Everybody on Planet Earth listens to music or watches TV. Everyone on Planet Earth will play video games in one form or another in my lifetime. It's a statement I'm reasonably confident about making. So number of players is growing, hours per player is growing. From a monetization perspective, your average mobile phone game monetizes, let's call it 8 to 10 cents an hour.

If it's not average, that's a reasonably well-monitized game. Your average console or PC game monetizes at 50 cents per hour. Your average cable channel monetizes it at 85 to 90 cents per hour. and the ones that are really engaging, monetize it $2 to $3 an hour. I would just argue that over time, at a minimum, video game monetization should converge with your average cable channel. And just think how engaged someone is if you watch them playing Call of Duty or Fortnite or Assassin's Creed relative to how engaged they are during Shark Week.

I would argue the only comparable form of engagement is really passionate sports fans. And that's that $2 to $3 an hour of engagement. So I think it's inevitable that monetization is getting. increase, and it's important, none of that includes e-sports. If you're under the age of 25, chances are you spend more time watching e-sports than real sports. And none of those numbers are encompassed in that. Incidentally, one of the companies we've invested in on the private side, which hasn't announced yet, so I can't say their name, I think they may have the big monetization unlock for e-sports, and that what they do, I don't know if you've seen the Hunger

Games or read them, but the audience can participate in the games. They could spend money and give a little bit of an edge. This lets audiences watching an esports match have an impact on the game. And I think that is going to be an enormous unlock for monetization. It's a company I'm super excited about. So we have engagement growing, big monetization opportunity, and then I think a big misperception in public markets that these are hit-driven businesses. They're not.

Full stop. For the last 20 years, Call of Duty has been the best-selling video games. every year except for when there is a rock star game. Red Dead Redemption or GTA. That's very consistent. If there's an Assassin's Creed, it's going to be in the top 10. If there's a battlefield, it's probably going to be in the top five. These franchises are super consistent. And the reason for that is they're social networks. Going back to these games are places as much as games. You have groups of people who like to play together, who like to play certain games together. And it's really, really, really hard for them to switch.

And this is something I understand intimately. I play video games the way a lot of my peers play golf. And it's made me appreciate two things. One is for sure they are social networks. If I want to play a new game, it is hard. Something like Fortnite, that's something that happens every five, 10, 15 years at most. Probably more like every 10 to 15 years. I'd say the most important thing it's made me appreciate, though, is the role of luck in my life and in everyone's life.

there are people I play video games with who are brilliant, ice cold under pressure, great teachers, natural leaders, and they didn't graduate from high school. In a different set of scenarios, this person could have been a CEO, could have been the president. But it's tough in America if you didn't graduate from high school to have that kind of outcome. Now they're great people, happy lives, but it just makes me appreciate, wow, luck. is the dominant... Sounds like the most interesting recruiting pipeline I've heard of in a while. Well, has someone not tried to go identify really talented gamers and recruit them into businesses?

Well, I'm actually a little bit embarrassed that the idea had not occurred to me. Yes. It's an interesting thing. It is a great recruitment pipeline. You know, it goes back to that movie long ago. Yeah, exactly. There's this video game in the United States. It's a great movie from the 80s.

There was a video game. And if you won the game, a sophisticated alien race, came to Earth, took you away to serve as a pilot in some sort of war they were fighting with an implacable enemy. And the game was the recruiting tool. Again, the value accrual in this process is interesting to me. So we've got like a huge secular tailwind, let's call it, in video games. You've laid out a lot of fascinating stuff. The question then becomes, it sounds like the answer to how do you invest in this trend is via the game builders, not via like sports teams or stadium companies or ancillary parts of the stack because I had a really interesting conversation

with a major league sports team owner who had said he looked at all these things. And unlike his ownership, there's no mode around it. Like, you know that there's probably not going to be another baseball league and there's not going to be many more teams. So there's like a scarcity value here that doesn't seem to exist in that part of the stack. Would you agree with that? Well, I would make two observations. High confidence, whoever made that observation is probably over the age of 40, A, and B, does not play video games. Because in the same way that baseball, golf, tennis, football, basketball. There are only going to be so many dominant leagues.

For Overwatch, there's only so many slots. Fortnite has approached e-sports in a very different way. Really good approach. There's only going to be so many slots for the Call of Duty League. So the teams that own those slots will be valuable. I don't think there's been a monetization unlock yet. I think this company we invested in could be a big part of it. Most of these teams today, they monetize primarily.

It's really cool. If you have the Cloud 9 or the phase merchandise, it actually really means something to people under the age of 30. So they're basically, yeah, they're DTC-CPG brands today as the way esports teams monetize. But I do think there will be scarcity. Yeah, yeah, that's fascinating. What have been your favorite video games that you've ever played?

Like maybe top two or three? I make a big effort to play every game that comes out and spend three to five hours on it. Because I sometimes feel like as a public equity investor in video games, the analogy I would make, imagine a world where of all the people who are, you know, investors at long-only shops or hedge funds or significant participants in the market, less than 2% of them actually went to stores regularly are shopped on Amazon.com. And then most of them were trying to be retail investors. So it is an enormous advantage, I think, from our first principles perspective, to actually play the games. This goes back to the Peter Lynch. If you like the store, if you like the product, you'll love the stock.

So I think it's important to play video games to understand them. But I did that for many years. I used to love the Assassin's Creed, the Elder Scrolls. But the game that really hooked me was a game called Destiny, which is I'm going to give you a nine-letter acronym. It was the first, in some ways, FPS, MMO, RPG, particularly set in a science fiction setting. I love science fiction. It's been an enormous part of my life. So I really love, the two things I love are both science fiction and then Lord of the Rings type history or variations of

history, fantasy stuff, but science fiction has always been important to me. So it really spoke to me. I got sucked in. So FPS being first person shooter, but online collective? Massively multiplayer online and then role playing game. Yeah, I think you'll like this. I was excellent at Counterstrike for a long, long time online. So I think I know like it's not a fantasy elements, but an amazing game. It's actually been very hubbling for me. There are very few things I'm competitive about. Investing is one. Ping pong is one. Chess is another. And video games have become another. but just as a 43-year-old man, it is really tough. I have to be super crafty and high-bop knowledge to do well in PVP.

I get carried through by the sub-25 contingent of the group that we play with. Yeah, we've talked a lot about technology specifically. We've got some more topics to cover in that vein as well. But I know you also invest in consumer businesses and really just those two sectors as your primary focus. And I know you find those to be the most alpha-rich of the sectors. and I think even your track record in the other sectors is not so good or subtractive from your total performance. So what is it about those two sectors that you think makes them good breeding ground for finding real alpha? The last numbers I saw, if you're to measure alpha richness, has the spread

between the top designe and the bottom desile in a given year, and that's your opportunity to generate alpha. It's one way to measure it. On a scale 1 through 10, Tex of 10, consumers are 7. Health care is a 5. I think nothing else is above 3.5 or a 4. There's a lot of alpha richness. I think it's because there is a huge uncertainty about the future in tech. So you get these wild swings and overreactions and dislocations. So I think tech is relatively easy to understand why it is alpha rich. Consumer, I've actually never thought about it before. Consumer, I think part of it is, is that in some ways it is the most immediately impacted by those technological shifts. So when radio came out, there's probably an opportunity to build new brands. And the brands

that move first to radio, build value TV, same thing, internet same thing, consumer tastes and preferences on the one hand, they're very stable. You have these really enduring businesses, whether it's Starbucks or Louis Vuitton, but on the other hand, you have a lot of businesses that have not stood the test of time. That is probably why those two sectors are alpha rich. There was a quantitative study done on my performance. I was actually somewhere between embarrassing and humbly to realize that I destroyed Alpha and very consistently in industrials, in energy, and health care, and financials. But luckily, I generated enough Alpha in Consumer and Tech to overwhelm all of that. Part of that is the alpha richness of the sectors, and then part of it is just personal interest.

Yeah, yeah. You mentioned also that you always want to be in the top 1% of knowledge about a company among investors in order to take a position. So talk about that little model. Why 1%? How does one even do that? There's a lot of smart investors out there. So to be in the top 1% of just about anything in this landscape is difficult, let alone across a lot of businesses. So what is the method by which you get to know businesses to that level? Insatiable curiosity, hard work, and then tech, and to a much lesser extent, consumer, it's a game of cumulative knowledge. Kind of an interesting thing about tech is a lot of people got washed out by the year 2000 bubble. And then Warren Buffett had been saying in the mid to late 90s, tech was, was outside of circle of competence. So I think a lot of people looked at the bubble, the collapse, Warren Buffett statement, and you had a whole generation of brilliant investors who avoided tech. And I would actually argue that it's harder to be in the top 1% of knowledge about banks,

insurance companies, which are 100-year-old businesses that my generation of investors, I think really focused upon than tech, because so many people got washed out and walked away. And then 0809 happened. A lot more people got washed out, walked away. way, there aren't that many people. We've all been going to the same conferences, to some degree we know each other, who have been doing tech continuously at a high level since the year 2000. And so tech being a game of cumulative knowledge, I think that's very important. So in some ways, I think it makes it easier than in other industries. There's so much dynamism. I think it was ignored for so long by so many. But yeah, it just takes hard work. This is a very hard business.

But I do think if I've been doing this for 20 years and one of X people who have been really focusing on tech intensely for 20 years, it is reasonable to think that I can do that. How many people read the Google S1 when it came out? The Netflix S one when it came out. The Salesforce S one when it came out. It's a realistic goal, but it is really, really hard. I think the best evidence of this idea is just read Ben Thompson for a year, read them every day. Like the only way that guy could churn out such high. signal content so quickly as if you had that accumulated knowledge. Absolutely. Now, Ben,

Stratatry, what a resource. Yeah, he's incredible. So I want to talk about value investing now. We've talked about growth investing. And your general take on what is, I think, one of the most interesting questions in the market right now. So the setup is, value's done very badly. Value is also arguably very easy to measure. Very hard to know what one element, like we've talked about, is going to drive a business for the next seven years, for easy to say what a company's PE ratio is, let's say. So it's done badly, despite a lot of great historical evidence that it works, just as a standalone factor. I'm curious your take on what you think the present and future of value investing is. So I think in the present, many reasons that it worked, there's natural mean

reversion in the economy. You know, if companies get really cheap, the stocks go down a lot, executive talent leaves, capital leaves, and that so is the seed of less capital, higher returns going forward. Companies are really expensive and the stocks are growing up. It attracts. capital, it attracts executive talent, sowing the seeds of future pressure on that industry. And I do you think at a fundamental level, two things have happened that I think are challenging that mean reversion. And you're seeing this. Top decile RICs are dramatically more persistent than they were even 10 or 15 years ago. I think there's two things for that. One is, without talking about politics, but there's dramatically more regulatory capture in modern America than I think

there's been the last 70 or 80 years. It's a regulatory capture, generally entrenched incumbents. But the second thing is, if you were to make me choose one buried entry, one competitive advantage, it would be scale every time, and particularly relative scale. It's great to be at 40%, but if you've got two competitors to reach at 30, that's not nearly as good as being at 70 and having everybody else under 10, or even being at 15 and everybody else under 1. And scale is actually more important online than offline. If you're going to similarly make me choose one thing to kind of understand AI in the world we're going into is my understanding, and I am no computer scientist or expert, but I do try to read all the research papers. The single most predictive element of

knowledge about AI quality is the quantity of data used to train the algorithm. The algorithms, they don't matter that much, although beginning to change with, there's a lot of innovation in the last three years. The infrastructure used to trade it doesn't matter as long as it's adequate. All that matter is the quantity of data. And it's been very well established in multiple papers from both Google and Microsoft research that for every order of magnitude increase in the data you use to trade an algorithm, the quality of the AI doubles. And quality means AI is fundamentally used to make predictions. And this is the variance from zero error. So going from 96% accurate to 98% accurate it is a doubling of quality. That creates all these powerful feedback loops for large tech companies,

where if data quantity drives AI quality and you have a dominant market share position, you have this feedback loop where you have the most users, they're generating the most data, that's training your algorithms, and so your algorithms are improving at a faster rate than anyone else's can improve. So I think when you put those things together, it's why you've seen less mean reversion. So if you had an algorithmic breakthrough that changed that, whether it's in GANS or CNNs or whatever it is, generative adversarial neural networks and convolutional neural networks, a lot of research is going into solving this problem. That would probably introduce more mean reversion within technology. And then the second thing is, why did value work in addition to those fundamental principles? There was this human element where you were perceived as taking career risk if you owned a really unpopular stock.

And algorithms don't feel career risk. and it's pretty easy to put into an algorithm, hey, this is the bottom decile. Within Quant specifically, I think a lot of AI has been applied to it with great success, but by probably a few players. Renaissance, I would bet what is at the core of their success as proprietary data. They went around the world and bought up proprietary data sets with 50 to 100 year licenses, and they intersected those with the stock market, and they're running all sorts of incredible pattern recognition.

And you can't get those data sets because Renaissance has them locked up. If you put all of that together, it's probably why value has struggled. And I also think even within the career risk, everybody's steeped in Benjamin Graham now. Everybody knows that Chapter 8 and Chapter 20 are the most important chapters of the intelligent investor. Everybody is steeped in Warren Buffett. my observation would be, I think today at a big long only, and you have some sort of quarterly or semi-annual or annual review with your CIO and you lose money in an expensive stock,

that probably counts against you more than if you lose money in a cheap stock. Yeah, it's amazing. Say a little bit more about why regulatory capture has increased and maybe specifically like what is behind that trend and maybe an example of the type of company that might benefit. I would rather not wade into controversy, but I would just say, I think that companies and their lobbying organizations have become super adept at hiring former chiefs of staff to influential people in Congress, to hiring former regulators and assembling an army of regulatory expertise to the extent that I think a lot of important laws in America today are actually written by the companies and by their lobbyists. The modern economy has become so complicated that I think it's hard for a legislator. A legislator, no matter how brilliant, to understand.

Yeah. What are some of the potential headwinds to, let's talk specifically maybe about technology? So obviously the antitrust talk has bubbled up again, specifically the regulation of very large technology platform companies where the concern is that it may not look like monopolies of old because so many times it's free or extremely low cost. Consumers tend to love these companies. But nonetheless, it is an issue that I think would probably affect investing outcomes. So how do you think about a potential headwind like that?

For sure, it's the most important thing to think about in the context of a lot of these large tech companies that we've spoken about. And it is a risk. It's absolutely a risk to Google, to Facebook, to Amazon. It's not as clear to see it as a risk for Netflix. It's a risk to Apple in some ways. But the way I conceptualize it while being super aware that it is a risk is that I think the most logical way to regulate these companies that might be the best for the American economy would be to simply. break them up. And I think there is a degree of conglomerate discount embedded in most of these companies and breaking that up, probably the capital allocation would improve. Within Google,

search is probably not growing that fast. And so if that were a standalone business that was paying a distribution tax to Android and Chrome, it might have very different capital allocation. It might be running a much higher buyback yield. What do you think about breaking these companies up, getting rid of the conglomerate discount, having appropriate capital allocation for each segment to the business, I could get comfortable with them being broken up. But of course, there's another outcome where there's very heavy-handed regulation here in the United States that really disadvantages these companies. And I would argue that that would be both a big risk to those equities and very negative for the United States because in that world, Chinese Internet companies

would dominate. Full stop. You anticipated my exact next question, which is the Chinese Internet. I know you're not an investor there, but it's an obviously critical part of the global technology ecosystem. So summarize kind of what your take is on how and where that matters most to U.S. technology companies, the Chinese Internet. Absolutely. This goes back to that 1% of knowledge. I have been following the Chinese Internet from its earliest days from when Tinsent was the only public company when I fought it closely because it was primarily a gaming company.

But I will never be in the top 1% of knowledge about a Chinese. internet company. I don't speak the language. And so being true to my process, at some point, could we have a very small 50 or 100 basis point position in a Chinese internet company if there's an enormous dislocation? Absolutely. But it is critical to study Chinese internet companies because in some ways, and they're more innovative than American internet companies. And it is largely because they don't have the established retail and payments infrastructure to contend with. So you have these super apps in China. Connie Chan from A16C, who I've never met. She's written brilliantly about these super apps. I've learned a lot from her. I go to China, minimum once per year to be

on the ground and try and just feel, wow, forget using cash. It's hard to use a credit card. You go to a Starbucks in China or in a restaurant and you want to use a credit card. And they're like, oh, where's that credit card reader? And literally it's like buried underneath. They get it out and it's dusty. So Chinese Internet is super important to see the shape of things to come for, I think, U.S. Internet. And they are great companies, very dominant, but I don't think they'll ever be regulated in the same way as U.S. Internet companies. How often do you see, I'm reading this really interesting book about, we'll call it the borrowing of technology from certain countries into others. do you see U.S. companies' management teams trying to look to China that's moved faster in some ways than we have to borrow ideas, whether it's in payments or in other areas? Absolutely.

What's some examples of that? The first cut at monetizing WhatsApp was driven by what had worked in China. You know, hey, we're going to have this be a B2B customer service channel. That didn't really take off. A lot of people just read that Uber, they're very focused on the potential. this could be a super app because we have so many users who are using it daily and you can hang all these other surfaces off of it in the same way that we chat is a super app in China. What is the role today in your process or do you see more broadly of alternative data? We've talked a lot about just data more generally speaking.

But in the investing process, I would say this is one of the major, very fast-paced things changing. So what's your take as a more fundamental investor, but obviously one that cares about information? What's your take on the role of alternative data in the investing process? If you're a fundamental investor, I think it has become table stakes today. Everybody has a credit card data. Everybody sees how sales are trending during the quarter. But I think it is very difficult to get a sustained competitive advantage from alternative data. Unless you're again, Renaissance, and you've locked up these proprietary data sets, they're sold to everyone.

I'm here to tell you they kind of have scale-based pricing. It's a great story if you're a big fun to say, hey, we've got proprietary data. No, you don't. Really great data scientists. They're making $25 to $50 million a year, either at Google, Facebook. So I don't think it's a source of competitive advantage. I do think it's table stakes. And I will just say it is the biggest change I have ever seen. In some ways, even bigger than Reg FD. There's a very sharp change in the investing world pre and post the implementation of Reg FD and companies became much more circumspect and what they said to select group of investors, which, by the way, was all to the good.

But this is the only comparable change. And I do think I would observe a lot of the big moves that you see in earnings season are generally the alternative data. It feels very precise. Hey, here's what their sales are. And here's what their sales are month by month. But it's a tiny sample set. There's a lot of error. And a lot of the moves you saw this past earning season were because the alternative data was predicting one thing, and it was wrong, and people were off sides. So I think it's just important to be aware of, it's table stakes, you need to be aware of it, it's kind of dark matter in the universe. The universe weighs more than we think. The dark matter of public equity investing is alternative data, on one hand, so to speak, which has a huge impact on prices.

One of these big providers comes out with a report saying a company is tracking to miss numbers. That company is down a lot that day. The other dark matter is what's happening in private markets. And they have a big influence on public equity companies without being, I think, immediately observable. But I do think you can use it in interesting ways. It's some ways that may be more helpful in venture. We have an app where we can actually get an alert for any company that's private whose sales are growing more than 200 percent. And then that's interesting. It may end up being more useful from an investment perspective as venture, but then everybody will go to those so the valuation of those rounds will incorporate it.

But you can also use it to do, you know, the core of most venture capital style investment analysis is looking at customer cohorts. And if you see the cohorts, you can get a reasonable degree of conviction looking out two to three years if the cohorts are stable to improving how they're going to act. And then you can model the revenues out with a higher degree of confidence than is generally possible to do with public equities where you don't have that cohort data. And you can begin to kind of construct cohorts for public companies and do fundamental analysis that wasn't possible. before. I saw you referenced somewhere that great Matt Kohler from Benchmark quote about not having to predict the future, just having to notice things in the present first. I love that idea. What other big things have you noticed in the present that we haven't talked about that you think will turn into big trends? Such a powerful statement. My job is not to predict the future. It's simply to notice the present first,

is the exact quote. Coming back to video games, there is kind of an example of this. You know, if you go back to 2012, these businesses used to be dramatically more cyclical around a console cycle, and a lot of that has been mitigated, has these games that become social networks, consoles are backwards compatible, but they used to be perceived as cyclical. And generally at the start of a new console cycle, they would have super high multiples. But if you go back to 2012, a new console cycle was right in front of us, and yet public equity, video game equities were generally trading at trough multiples. And there was a fear, again, I think driven by a lot of investors who don't play video games and don't understand them. And there was a fear that the reason that the video game companies were, their sales were declining, was because of the iPhone.

That this was a permanent change. It was a substitute. And so I looked at the video game industry and thought, hey, it's behaving just the way it normally has. But there was this huge fear, this big disconnect. And from my first principle's perspective, I believe that there was no way. that a game you played on a four-inch screen with your fingers, which are a very imprecise input method, was in any way a substitute for playing call duty on a 50-inch screen in surround sound with your friends. It was a compliment.

And so that was just noticing the present that, hey, there is this fear in the market that the iPhone is driving substitution away from console and PC video gaming. And being able to say from a first principle's perspective, that's not the case. What's actually happened is this is the longest console cycle in history. So you could almost argue the relative gap between consoles and iPhone at the time was the smallest it would ever be. Even the relative gap between consoles and PCs was as low as it would ever get. And so the new console would actually have the biggest uplift ever. It was the PS4, the Xbox One. They would have the biggest uplift and processing power ever over the prior generation

because they'd had the longest for more law to run. So I looked at all that. You know, and I made public equity video games a very large position in my fun. I think I owned between 8 to 10% of a majority of the public hack free video game companies in America. So that's an example of simply noticing the present first. Another example of being able to invest simply based on an accurate understanding of the present, happened in the summer of 2017. Generally, most of my career is a long-only investor.

I was underweight retail because I thought physical retail was a structural share loser to e-commerce. And then beginning in mid-2016, you started to hear from really forward-thinking DTC brands and e-commerce companies that they're finding that, wow, if we have a few stores, it actually dramatically impacts our online advertising efficiency, which is the single most important metric along with customer attention for any e-commerce company. So it makes sense to have 25, 50 stores and, hey, maybe they're just showrooms, but, wow, there is a value to physical retail. So you started to hear that. I started to hear it more. It made sense to me from a first principal's perspective as a consumer. And then in the summer of 2017, Amazon bought Whole Foods.

And I thought this is a complete validation of the value of physical retail. From the world's biggest and most sophisticated e-commerce company, they're saying physical retail has value. And yet, your average retailer went down somewhere between 10 and 20 percent that day. On what to me was kind of the absurd idea. Amazon is going to start putting TVs and PCs and game consoles and Whole Foods. They're going to start selling apparel in Whole Foods. How does this change the competitive dynamic at all? I think it's very simple.

The mental models you want to have for physical retail. You either want exclusive supply or you can't find it on Amazon or you want high cash pay as a percentage of your customers because that means you're not competing with Amazon Prime. competing with Amazon Prime really hard. Competing with Amazon non-prime, not nearly as hard. And then you want to filter both of those through. You can get a good idea how sophisticated a company is from a digital perspective. How many people are in your loyalty program?

How many personalized messages do you send out per week? So what is a degree of digital sophistication? So you look for proprietary supply, high cash pay, and then a reasonable degree of digital sophistication. And that's what you look for in a retailer. Yeah. What is the most interesting company that you do not own? Well, right now we are not involved in Netflix.

Netflix throughout my career is by far my biggest mistake. I never owned it in size. And this perfectly fit the Peter Lynch. If you love the product, you love the stock. It snapped really neatly into a preexisting middle model, which is just the internet kind of gets rid of all distribution layers between the producer and the consumer and content in the pre-netflix world was basically being marked up 400% and then resold to the consumer.

So if you're really talented director, actor, writer, you go, you work for a large entertainment company, a production house. They mark your content up 100%. You can look at their gross margins. And then they sell that content that's marked up 100% onto Comcast, direct TV, whoever, marked up another 100%. So there's a 400% markup between the original content creator and the consumer. Netflix got rid of all that, which meant that they could deliver dramatically superior consumer value.

So I've always thought it was kind of inexcusable that I miss Netflix. Earlier, out of tradies, we were short Netflix. And the reason we were short it, I'm completely aware there's this great long term, very simple bulk case. It's just like, hey, let's say they're eventually going to have 500 million subs, $10 a month, $60 billion of revenue. They're going to run at a reasonably high margin. There's going to be a couple of global video distribution oligopolis and producers, and this is going to be one of them, completely get it. But in my experience, one of the most important things to look for as a technology investor is changes in competitive intensity. And it is even more important in technology than other areas of the economy because of the way the Google and the Facebook ad auctions work.

These are both Vickery auctions, their second price auctions. So if you operate in a relatively uncompetitive segment, you have incredible advertising efficiency because your winning bid is always the second bit. But it also means what auction pressure can do to that customer acquisition cost. I've actually never seen anyone model it correctly. It generally blows out in a way that people cannot imagine. So I looked at Netflix and I thought, okay, they've had a relative. uncompetitive online customer acquisition world.

Maybe it's them and Hulu to some degree. Maybe they're bidding. I would guess Netflix is bidding on Google keywords every second. I would also guess they're probably the only bidder of scale on 50% of those. So they have incredible ad efficiencies. So when all these other companies come in, you're going to go from incredible advertising efficiency to much lower advertising efficiency. So I was reasonably confident that had not been modeled.

correctly. And then I think what drove Netflix from 250 to 350 was realizing that they had a lot of perceived latent pricing power. It's one of Charlie Munger's mental models for how to make money in the stock market. And it was, wow, all of a sudden, let's run that math at instead of a $10 per sell, let's run it $20. And geez, you get something really exciting. And I thought, well, as we go from a world where it's kind of just Netflix to one where they have a lot of competitors, pricing power probably goes away, your cat goes up. And then I fundamentally thought, no one knows what a piece of iconic content like the friends, the office, is actually worth. And I would just say from my own Netflix usage, my wife and I, we watch 45 minutes of a drama,

and you watch 15 minutes of a comedy, and we actually just cycle through the office in Parks and Rec. And, you know, those are some of the most watch shows on Netflix. So I thought, hey, nobody really knows how valuable those are. And so you had a bunch of inputs into their business model that I thought after people feeling very certain, we're going to feel really uncertain. And it also felt like, wow, a very well-owned name. There's ways you could look at it and say it was cheap. There's other ways you could look at it to say it's expensive.

And generally, when the uncertainty about five to seven-year outcomes goes up, valuation horizons come in. And so I thought people would start to value Netflix on earlier numbers. So we put all that together. It was a short for us. But now it's what I would call it's a meaning of livestock for now where I do still believe in that long-term outcome. But the degree of difficulty is,

so hard. And I avoid really high degree of difficulty stocks. One of the things you talked about earlier is this accumulating knowledge 20 years in having learned so much about these businesses. What advice would you give new entrants, young people that are interested in getting into the investment business in terms of what to focus on what skills are going to become most valuable to be successful investors over the next 20 years? Would you say you have to be steeped in Buffett, Peter Lynch, Soros? You have to know those fundamentals, the basics. I would encourage them to listen to your podcast. I think there is a lot of accumulated wisdom here. I think the most important advice I would give is focus on what you're passionate

about. It just happened my entire life. I've loved science fiction. And so it's very natural for me to focus on technology because I've always had an interest in the future. If you are passionate about an area of the market, odds are actually high that you're going to end up being a really good investor because I do think knowledge and hard work, they matter. And it's tough to get to that top 1% if it's not fun for you. So I think you want to get to that top 1% knowledge level. Recognize that it's going to take a long time. You know, hey, if you focus on three stocks, can you get there in three years? Maybe. But recognize it's going to take a long time. Approach it with humility. But pick something you're passionate about where, you know, the first

thing I do when I wake up on Saturday and Sunday morning is I read about technology. It doesn't feel like work. It feels like fun. And pick something like that. So three closing questions for you. The first picking up in what you just said, what is the most maybe non-obvious source of reading in the technology sphere specifically? So Ben Thompson's not an answer that's allowed. Something that you read consistently that you think is really valuable. I check tech meme 10 times a day. Tech meme. Okay. Tech meme. There's so many tech blogs. It's hard to read all. You know, Stratatry is one of the best. There's a couple of others that are quite good. But TechMeme surfaces the best content of that day. And then Twitter. Twitter is the world's greatest

interest-based network. Yep. I have to ask a slightly different version of the sci-fi question. Rather than ask your favorite book or series, I'll ask for your favorite sci-fi character, individual character. I do love the two people who in the Second Foundation are actually the representatives of the Second Foundation and they go along with the Mule. Betta Dorell? Yeah, Beto Durel. I think that's a great character. Low-key, humble, under the radar, changes the course of history for the entire galaxy. My closing question for everybody is to ask for the kindest thing that anyone's ever done for you.

So I feel I'm a big student of happiness research, and happiness research would say many things, but one of them is that the most important emotion I think in some ways to feel is gratitude. So I feel really grateful to so many people. I feel very grateful to my junior English teacher, a woman named Nancy Eisenberg. I sent her a note in 2014 explaining this, but I was actually not a good student in high school. I love to read. I love to do other things. I was very social.

I played video games, but I did not study that hard. Junior year at my high school in Houston, Texas, and the big thing was the junior research paper. You had to write an enormous paper that was really going to be the centerpiece of your grade junior year. of course junior English is very important. So I thought, wow, I better be super serious about this. And it had been a six-month process. And I thought, I'm going to work on this for three days, really hardcore. And that was a lot of work for me at the time.

So I turned in the first draft, and it comes back, F. And I think, geez, I worked pretty hard on this. I objectively think it was pretty good. So I went to see Mrs. Eisenberg, and I said, you know, Ms. Eisenberg, this is the worst grade I've ever gotten. And she said, well, Gavin, I have very high expectations. for you. And I know that you can do better than this. You know, that was perfectly designed to appeal. She was a very good teacher to a 17-year-old young man to make him work hard. So I went and I worked hard for the first time in my life. And it was super fulfilling. And I ended up getting a B-plus or an

A-minus. She wasn't going to give me an A. But that was an incredibly fulfilling experience for me that I think drove a lot of future outcomes in my life. Your enthusiasm jumps through the mic, as I'm sure people will hear and will have enjoyed very much. So thank you. Thank you so much for your time and all the interesting ideas. Awesome. Thank you, Patrick. Thanks for the awesome questions. Thank you. Hey, everyone. Patrick here again. To find more episodes of InvestorField Guide.com forward slash podcast. If you're a book lover, you can also sign up for my book club at investorfieldguide.com forward slash book club. After you sign up, you'll receive a full investor curriculum right away and then three to four suggestions of new books every month.

You can also follow me on Twitter at Patrick underscore Oshag, OSHAG. If you enjoy the show, please leave a quick review for us on iTunes, which will help more people discover invest like the best. Thanks so much for listening.