Motley Fool Hidden Gems Investing - Bridges and Digital Toll Roads

Episode Date: March 27, 2024

Merchants are going to be taking a bigger cut of credit card swipes, what does it mean for VIsa and Mastercard?  (00:21) Bill Mann and Dylan Lewis discuss: - The tragic Francis Scott Key Bridge collapse in Baltimore and how it affects the port and the companies with goods going in and out of it. - Visa and Mastercard’s $30B settlement with merchants over interchange fees.  - A curious crypto story with Nilam Resources. (12:09) Tech insider Kara Swisher joins Deidre Woollard to talk about her new best-seller “Burn Book” and how a tech CEO helped her kids use social media a little less. Companies discussed: V, MA Host: Dylan Lewis Guests: Bill Mann, Deidre Woollard, Kara Swisher Engineers: Dan Boyd Learn more about your ad choices. Visit megaphone.fm/adchoices

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Motley Fool Money starts now. Dylan Lewis I'm Dylan Lewis, and I'm joined over the airwaves by Motley Fool senior analyst, Bill Mann. Bill, thanks for joining me. Bill Mann Hey, Dylan, how are you? Welcome back! Dylan Lewis Yeah, it's great to be back after taking some time off. It's great to be back with you. We haven't done a show together since my vacation, so it's nice to be back in the seat. We're going to be checking in on some Curious Stories in Crypto today. We're also going to be looking at some thoughts on the

tech industry from Kara Swisher. First up, though, Bill, a bit of disruption in our own backyard. An absolutely tragic scene in Baltimore this week with the Francis Scott Key Bridge collapsing after being struck by a cargo container the early hours Tuesday. Bill, I've been on that bridge. I'm guessing you've been on that bridge as well. This is one that hits home for us. Yeah, many times. This is not just a local thoroughfare, but it is one of the major north-south arteries in the United States. A very important road and port. The Port of Baltimore is one of the largest transshipment points for cars coming into and out of the United States. It's also a huge coal facility for shipments coming in and out. At the moment, the Port of Baltimore

are completely cut off. You did start by saying tragedy, and I do want to start by saying it's the loss of life that ultimately is the thing that we should be concerned about first and foremost. It's very, very sad what happened. It's a miracle not more people were on that bridge. Not just a miracle, but incredible, incredible work and foresight by the captain on the ship. So that has to be called out. But yeah, this is going to be a while before it gets cleaned up. Obviously, there's a lot of ways to get from, say, New York to the southern part of the U.S., but there are not that many ways that are better than Highway 695 for hazmat trucks, for example. The cost to commerce is going to be substantial. The hit to our infrastructure has been substantial.

Yeah, Bill, I think this is one of those stories that is going to take a very long time for all of the pieces to come out, all the details to come out, and all the consequences to kind of be mapped out. But I think one of the clearest takeaways at this point is it is going to be incredibly disruptive to the local Baltimore area and really anything that passes through it. And as you were just saying, so much activity flows through that port. Yeah. And there's a book that I read a couple of years ago, and it's a great book if you're talking to someone at a cocktail party and you'd like to end the conversation, mention that you've been reading the book Box by Mark Levinson, which is the history of the shipping container. And it's

a fascinating book, but doesn't sound so on the surface. But when we think of ports, we tend to think of them as being interchangeable at this point, right? Like, hey, it's a place where a boat can pull up to the side and there's a crane that pulls things on and off. Ports now are specialized. So, the Port of Baltimore is specialized for the types of products that flow through that port, particularly cars, gypsum, lumber, coal, things of that nature. So, while there are other ports that can take that volume, it's not just as simple as saying, okay, now you're going to Norfolk, now you're going to Newark. Those ports are not geared to handle that volume in the same way that Baltimore is.

Well, Bill, that's all we have today. I got to go. You got to read a book? You joked that it was a good way to end the conversation. I'm just kidding. I love it when you go deep, and I love it when we get wonky. Yeah, I think it's a fascinating story. I love the book recommendation there, Bill. One of the things I'm curious about is, as this clearly is going to disrupt supply chain and logistics, what it means for the companies that wind up flowing a lot of goods through a place like Baltimore. We have seen companies try to tap into interruption insurance in the past. Do you feel like this is something that we are suddenly going to become

experts in, in the way that people do on Twitter? Yeah. I became a Twitter expert in shipping law. I got my master's yesterday in it. Again, usually when you talk about these things, you're talking about tragedies. There were huge amounts of business interruption cases that happened after the 9-11 attacks. There were huge numbers of business interruption insurance claims after Hurricane Katrina. And there will be more here. Right at the top of the list is the Port of Baltimore, which is a port authority, but it operates under concession. So, yes, there are companies out there that offer business interruption in church. Berkshire Hathaway is one that has been known to do so. There will be claims and there will be big, but I would assume

that many of the claims will be opportunities for companies to perhaps cash in a little bit. And I only say that not pejoratively because that's what's happened every single time in the From the supply chain and cargo world over to the digital toll roads, we have some updates in the credit card landscape. Visa and MasterCard's toll roads about to get a little bit cheaper for merchants. Bill, the two largest credit card companies settling suit with merchants over their interchange fees, which will save about $30 billion in fees over five years for merchants. How big of a deal is this for the credit card companies? For the credit card companies, there's only a certain part that's really that big of a deal

because Visa and MasterCard don't actually get these interchange fees. These are what goes to the banks that underwrite the cards themselves. So, Visa and MasterCard, if they were the ones who were negotiating, were actually negotiating with somebody else's money, which is a great place to be negotiating from. Now, one of the big issues is that those swipe fees were somewhat unbound. One of the agreements, though, that could impact Visa and MasterCard is that it would allow the merchants to charge different prices to consumers based on which credit cards they use. So, you might come into a situation where a merchant would say, well, there's a 2% fee if you're using a Visa or a MasterCard. There's a 1.2% fee if you are using Discover. And a lot of

these fees are things that exist today, but because they are standardized, you don't necessarily see them. So, in some ways, this is much, much bigger for the merchants than it is for Visa and MasterCard. And in some ways, it's much bigger for the banks than it is Visa or MasterCard themselves. If I'm not mistaken, the only way we've really seen that in a consumer-facing way in the past has been, hey, we don't accept American Express. It's been that simple. It hasn't been the negotiated menu of this for this and that for that. It's just, we're not going to accept Amex. Does it not feel a little bit like cable television, where for years we wanted unbundled pricing, and now that everything's

unbundled and we all have 34 different things we have to pay for? Man, I wish somebody could just bundle this back up. This feels like that a little bit. If I pull out a Discover card, do I get a lower overall fee? If I pull out an American Express card, do I get it for free? I think we may be seeing things like that. Although, again, consumers tend to love simplicity. So, I'm not sure it's all that big of a deal. But anytime you have one of those friction costs. I think at the end of the day, it's going to be a benefit to consumers, the fact that it seems like it's going to be lower or at least have a bound put upon it. All right, we're going to stick with payments for our final story in our news roundup. Payments of

sorts, more of a store of value, perhaps. The world of crypto, specifically Bitcoin, has had an incredible march, up 20% this month, up over 50% year to date. Bill, not surprising that when we see a huge surge in interest in crypto and the price of crypto, the activity of companies hitching their wagon to crypto also goes up. Not just companies. We've seen stories about how the North Koreans are suddenly very active, again, trying to hack into some of the lower security crypto projects. They've stolen several billion dollars from them, as you know probably much more so uh by the time all is you know all is uh all is known there was a fascinating story that came out uh starting about two days ago a company that and

i'm not making this up had a market cap of 925 027 that was it we're not used to working in those units no no and as i and and as i said earlier please don't go out and buy this uh called Nylem Resources announced that they were starting a joint venture with a letter of intent to acquire 24,800 Bitcoin. Now, I don't know if you're that much of a math guy, like I had to take off my shoes so I could count high enough, but that was about 1,700 times higher than the actual market cap of Nylem Resources. So I don't know how they thought they were going to do it. Yeah, where does that money come from? When I saw this story, Bill, there's the announcement, there is the very predictable share price movement for the business that is just

absolutely nuclear, goes crazy. And then we see that the CEO steps down immediately. This, to me, I know we're recording this in late March, had the feeling of someone leaking an April Fool's script a couple days early. This is the kind of thing we would put out as a news story on April 1st. Right, exactly. Unfortunately, there was a real stock attached to it. The former CEO had left and basically called this a classic pump and dump. We can use allegedly all we want to. When you ask where the money was going to come from, you're going to be shocked to know that there was a JV that was announced with a country that has somewhat lax security laws and somewhat lax extradition laws. I don't know what the game was other than the stock went up about

1,500% yesterday. As of this recording, it's only down 95% today. It's just one of those games that when I see in the market, I'm like, I understand that this was a sub-$1 million company. At the end of the day, it was not even a rounding error in the market, but it is the kind of thing that I, as someone who likes to believe that the U.S. markets have integrity, it really, really concerns Bill Mann, appreciate your takes on crypto, shipping containers, and all things weird in the market. Thanks, Bill. Coming up, tech insider Kara Swisher joins Deidre Wollard to talk about her new bestseller, Burn Book. They discuss innovations that she's optimistic about,

and how a tech CEO helped her kids use social media a little bit less. You used this phrase that I like and I use all the time, too, which is, the math wasn't mathing. And you talk about that when looking at companies, especially before the dot-com bust. We do the same kind of thing here. How does focusing on the numbers help you make sense of these companies? Because I think a lot of journalists don't do that, and you always have. No, I actually took a course, an executive accounting course at Wharton,

because I needed to understand how spreadsheets worked because I don't think I did awesome. So that was when I was a younger person, I took the train up to Philadelphia from D.C. because I really, at Wharton, because I thought it was really important to do that. And any opportunity I had to read about accounting because the company I was covering, AOL, was a very tricky accounting company. They would hide expenses and goose revenues in ways that were kind of tricky. And so it was really important to understand. I think accounting is one of the most creative jobs in any company,

if it were how to make a company look, whether they're doing well. Ultimately, performance is what matters, but it didn't at that time because the stock would take off on just the smallest of things. And so I really wanted to understand the math. And now you had to have a suspension of disbelief because even if the math didn't work, if it didn't math, it didn't matter with some companies, right? Like right now, Tesla's worth 20 million times more than all the car companies put together. Is it going to be that big? I don't think so.

But obviously, the market does, so that's what it's worth. Sometimes when people get upset, it's not worth that. I'm like, that's what it's worth. That's what people think. That's what people are willing to pay for it. But from a real gravity perspective, much of what was happening was puffy, to say the least. Yeah, well, there was always the thing that all you needed was a good PowerPoint to raise money. And I think that's changed since then.

No, because it went into crypto, had the same thing for a minute. Now, AI, anything you put AI, slap AI on your company, you're an AI company. So, you know, that's what happens. And then there'll be significant companies in each area, right? It doesn't mean the area's wrong. It means that everybody rushes to a trend. And that's kind of okay. I don't care.

Just buyer beware. Well, it's sort of like the more things change, the more they stay the same, right? Because, I mean, so little has changed. I mean, your descriptions of, like, Marc Andreessen and some of the others in the early days, you know, the tech bad boys, we still sort of are seeing some of those tech bad boys. I mean, are we ever going to see a substantive change? No, they're bad men now. They're just grown-up men now. They were bad boys, and now they're really deeply, grievously irritating old men is what they are now.

What about the new batch? I like a lot of the newer people more. They have a little bit, they have a little more humility. I don't expect a lot of humility necessarily, but I think they've got more sense. Some of them are more mission-driven in a real way. Before, they used to say they're going to change the world, but it was very fuzzy what they actually wanted to change. They just wanted to make money and disrupt things as toddlers want to do. But I think a lot of the newer ones are really interesting.

I think they're more thoughtful. They're better read. They've seen what happened. Money is important to them, obviously, but it's not the most important thing necessarily. And a lot of them are climate change tech people. I'm really interested in them. Or people are doing healthcare stuff. I'm interested in them.

I don't think money's their first and only thing, or their stock. I think it's important, but it's not their only thing. Do you think, you know, there's so much talk of the next Steve Jobs. Do you think that there can be or should be a next Steve Jobs? I mean, it's obviously not Elon, so. No, it's not. It never was. No.

You know, people are saying Sam Altman, but I don't know. We'll see. He's got some time to go. Well, you know, Steve leaves a real legacy. You know, he kept having hit after hit after hit, this guy, and the company keeps having hit after hit after hit. So, you know, they're a little like the Rolling Stones over there at Apple. You know, they keep going, and eventually they'll get too old.

But, you know, even Tim Cook, he's 10x the company in terms of value, in real value, real revenues, real changes in the software and services. So, no, I don't think you need that. I think lots of industries have. I mean, you don't know who the head of the electricity world is, but you did know Thomas Edison. So I think founders have a certain romance at a certain moment in history. But you certainly don't, again, you know, who's the insurance guy? Who's the head of, you know, Hollywood even has sort of dissipated of who's the big moguls. I mean, I guess Bob

Iger, but is he, you know, that kind of thing. You've covered entrepreneurs, but you're also an entrepreneur yourself. And I'm wondering what lessons could you have learned only by going through that experience yourself? I thought it was important. I think sometimes business reporters don't know how to run a business, right? Like, come on, how can you judge? Let me tell you about Uber.

I was like, I think I'll run a business. I don't run Uber's business, but I certainly understand P&Ls. I certainly understand management. I understand fundraising and things like that. And it's on a much smaller scale. Media is a much smaller scale of everything compared to these companies.

But I have a sense of what it's like to be an entrepreneur. And I have been one and I've created lots of different companies, not just one, a half a dozen, you know, and I've moved into other directions. And so you have to sort of have a risk profile that media tends not to have had in the past. Now, there's lots of new, interesting things happening. But I certainly you learn a lot by doing right instead of just talking about it. And so I really, you know, a P&L gives it creates a certain kind of discipline in your mind. and especially you understand, say, even their problems or what they're lying about.

You know, oh, no, no, I know, I did that, that kind of thing. Yeah, and I think also the role of partnerships, too, because you had a great business partner in Walt Mossberg. You probably saw from the inside what can go wrong in partnerships and what can go wrong. We never had a fight our whole time. It's incredible. Amazing. But, yeah, the importance of a good partner, for sure.

And, you know, any time you have a business, you run into toxicity, you run into great things, you run into problems that weren't problems and then become problems. Every day I run something. Although I don't have staff. I call myself staff zero. I have people who work for Vox who then do stuff for me. And I guess I'm ultimately the boss, but I don't manage them. Well, you've got young children, but you've also got older children. I'm wondering, what's the difference between what you're probably going to tell your younger children about technology versus what you told your older children?

Neither. No, nothing. I think I was pretty clear. You know, my older kid's other mother was the chief technology officer of the United States of America under Obama and also was an early Google executive. So there wasn't a lot we need. And I was good at technology. So they didn't really get anything over on us, which was sad for them. They couldn't go, oh, mom, you don't understand this.

were like oh yeah we built it you know um or i would call sometimes when my sons were using too much snapchat i ran into i introduced them to the head of the snapchat and i i jokingly said to him like will you turn it off if i need to and he was like absolutely cara boys don't use it too much so i had a i had an uh of course he didn't do that but you know what i mean my kids were like what you care what like you know i was like that's like using santa or something like yes that's Correct. You see, he was Santa to them. They were never more thrilled when they met the founder of Snapchat, Evan Spiegel. But no, I don't, you know, I trust my kids. I raised them to think, to have a broad outlook on a lot of things. I don't mind if they read online as long as they read, right? I think people focus a little too much on the thing. And I definitely had a talk with the boys, the older boys, about porn and about the deleterious effects of that kind of stuff, you know, because I was aware of it, you know, more than probably many parents about what was going on online. I think with my daughter, I'm going to have a long talk about how you behave online and also not just how a woman behaves, but things that can come at you that are particular to women, especially young girls, about self-esteem.

I talked to my boys a little more about loneliness, you know what I mean, because there's a lonely, men are suffering in many ways. her boys are. And so, you know, I think one time my son got, when in-app purchases started on the iPhone, my son spent $2,000 on things. And he did not do that again, let me just say. It was on a game that he was buying himself, you know, blinds or whatever the hell you buy yourself. And I literally was like, yanked him out of bed. I'm going to kill you. And luckily, because it was so hidden i got the charges reversed because then and i got some insight to it because um because i was like look at how tricky this was how would have how would a nine-year-old why are you letting a nine-year-old do this and also he couldn't tell what was for sale and what and so they you know

they reversed it pretty quickly but still um you know i i learned a lot from them and like reddit my kids my older kids i knew reddit was going to be is where young people are watching stuff and not necessarily other places because my kids used it a lot or watching YouTube and Reddit, which I thought was interesting. So it goes both ways. So are there any companies outside of the tech space you're finding particularly interesting right now? Yeah, I'm really interested in climate change tech. I would put them in a tech thing, but it's really climate change innovation. I'm fascinated with a lot of the healthcare innovation and you could say tech, but it's innovation like

around data and AI and more and cloning and gene folding and all kinds of things. I'm super interested in the food area, the innovations in food, like, you know, urban farming, farming that's in a, you know, without what, where the same water goes through and build in office buildings. I have this dream of all the farms being in the cities and then you get fresh vegetables right there. You know, it'll start off expensive, like those strawberries that are so delicious and then move down the stack.

I'm interested in, obviously, water, desalinization of waters, things like that, things that are real. And obviously, politics. I live most of my time in Washington now, after the pandemic. Long story, I didn't choose it, but here I am. I spend a lot of time on regulatory issues, that's for sure, around tech. Last question for you. We're in another tough spot for media and journalism. we've been there before you you and i have been through a few of these journalism cycles does this one feel different and what's your hope for the future of journalism it does not feel different it's the same thing it's like you know um i just feel like this has been going on for 30

years the decline i covered uh you know i was at the washington post when it was at its top thing the top time but then i was covering retail which was dying local retailers so i watched the economic devastation when they lost all those local retailers to walmart actually that's what walmart didn't advertise it but the local retailers did and then when i saw craigslist come there's classified got hit this was 25 years ago and then free news meant they had to make a product that was worthwhile for people to pay for and before they just won on on news that was commodity based essentially so you know i think the big problem with media is is is that it treats like it's not a business. It's called the news business for a reason. It's a business. And

so I think they didn't get costs in line fast enough. They agonized over tech instead of jumping right in. They relied too much on tech as if tech didn't want to be in the media business. The tech is in the media business and they're better at it because they have more money and they have more resources and they don't care so much about accuracy, but they're in the media business. There's no question TikTok is a media business as far as I'm concerned. And so, you You know, media's got to right-size itself and then try to figure out what it can sell to people that's substantive. I've done it on a smaller level, and everybody else has to. It's just we have a kind of a romantic vision of ourselves in the media that I think we need to shed.

We can be important and viable at the same time. You know what I mean? Or the other options are the government pays for it, like BBC, but that's never happening in this country. Or billionaires. billionaires. We rely on the kindness of charitable billionaires. And that's been what we've been doing so far. Yes. But let me just tell you, I know them. Don't do it. It's a mistake. It's a mistake. Some of them will be good. Some will be bad. I'm certain their children won't be good. So I don't know what to tell you about that. That's not a that's not a long term solution to

what is a secular, again, a secular problem, just like with commercial real estate, like come up with new ideas to get keep your audience and understand the important part you play in democracy. But this is the first line of the book. It was capitalism after all. It is capitalism after all. As always, people on the program may own stocks mentioned, and The Motley Fool may have formal recommendations for or against, so don't buy or sell anything based solely on what you hear. I'm Dylan Lewis. Thanks for listening! We'll be back tomorrow. Thank you.