The Pomp Podcast - #887 Legendary Investor Explains How Bitcoin Will Be Worth Millions w/ Peter Doyle

Episode Date: March 28, 2022

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What's up, everyone? This is Anthony Pompliano. Most of you know me as Pomp. You're listening to the Pomp Podcast, simply the best podcast out there. Now let's kick this thing off. Peter Doyle is a co-founder and managing partner at Horizon Kinetics. In this conversation, we discuss Fed policy, Bitcoin, inflation, and the variety of different investment opportunities that Peter and his team have been looking at. I really enjoyed this conversation with Peter, and I hope you do as well. Before we get into this episode, though, I'd love to tell you about our sponsors. This episode is brought to you by BlockFi. BlockFi provides financial products for crypto investors. Those products include the BlockFi wallet, a US dollar loan

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of his personal opinion. This podcast is for informational purposes only. Peter, how are you? I'm well. How are you, Anthony? I'm doing fantastic. I've been looking forward to this conversation for like two weeks now. I want to start first with we are living in some pretty insane times when it comes to monetary fiscal policy and the implications of that.

When you all think through your investment process or your research process, do you start with the kind of macro environment in the monetary and fiscal policy environment? Or do you start at the actual assets themselves and then overlay that on later? Yeah, we start from the bottom up. So we're contrarian investors, and we're looking for where the best opportunities are and what's cheap in the marketplace. And then we pay attention as we go up the ladder to the more broad things. But you're incredibly right. I would say that there's three things right now that concern us. There's a global debt crisis. There is a breakdown in trust in institutions. And then there's the potential for a serious energy slash commodities shortage that the world is going to face. And we found a lot of opportunities within each of those areas. When we start to think, let's go to commodities first.

It's very obvious that commodities are already kind of a little crazy because of the macro environment. but then we get the Russia-Ukraine conflict, and now everything just goes haywire. We've got nickel explodes upwards, then it draws back down. We've got oil and natural gas prices exploding. We've got wheat exploding. We've got concerns around fertilizer prices and potential leading to global famine. I mean, you can just go through the whole, you know, kind of chain of events. How are you guys looking at the commodity market right now?

Where do you see the opportunity? So I would say that there's a tremendous, there has been a tremendous divestiture by most institutions because of the ESG movement. So you're able to find oil and gas companies at very cheap prices. You're able to find royalty companies that are extraordinary opportunity, metal companies that are trading cheaply.

We're primarily focused on finding plays that are going to benefit from inflation that really are capital light. So companies that don't have a lot of fixed equipment or planted equipment on their balance sheets, but are going to benefit from the continued rise of commodity prices. And so when you guys start to look at this,

do you break down a difference in the commodities when you look at U.S. markets versus various other markets around the world? Or do you look at commodities just globally? We look at it globally. We're looking at what's the supply-demand situation. And really what's going on, in our opinion, is that there's a large portion of the world's population

that wants to increase their standard of living. And they need and require a tremendous amount of energy. And the supply is not there. And in some cases, the supply has been deliberately destroyed. But the demand is going to continue to grow. So if you have growing demand and limited supply, you're going to see much higher prices. And that's what we're in the middle of, in our opinion. And when you start to think about some of these commodity prices that have just gone pretty crazy over the last two years or so, are you able to break down how much of that is due to undisciplined monetary fiscal policy, how much of it's due to supply chains, how much of it's due to the Russia-Ukraine conflict? Or do you not worry so much about assigning maybe guilt or kind of causation to any one of those, and you're more so just looking at it as a holistic analysis of the actual prices of the assets and where it's going? Yeah, we're trying to understand the fundamentals. And, you know, the money printing and all of that and the potential reserve currency of the U.S. dollar going away, that's just kind of potentially icing on the case if you're long commodities and you're hoping that they go up in price. That's not what we're hoping. If we're right about what we're thinking, it's not good for really anyone. But unfortunately, we're just looking at the facts, and it's making us somewhat concerned that you're destroying – the supply is not going to be there. In some cases, as I mentioned, you've destroyed the supply, and the demand is not going away.

So they've been trying to get rid of coal for the last 50 years, and coal in the last year is up 250 percent, and we're using more coal today than we were 50 years ago. So I don't see us transitioning anytime soon, and that transition is going to require a lot of hydrocarbons. So the demand is there and supply is not going to be. So that basic economics, that's higher prices for oil and gas, any commodity, any food source that you're thinking of. So this is a really interesting point. If we talk about some of the things that folks are trying to get rid of, right, I'm going to label in an overgeneralized way, the critics or the people who want this stuff to go away are environmentalist in some form or fashion, we'll use that as a label for kind of the folks who are saying, hey, we should get rid of coal, we should get rid of a lot of these things, usually from an environmental kind of perspective. Then there's folks who I will label as capitalist, and not necessarily that those two groups are opposed to each other, but just as a way for us to have this discussion. The people who say, hey, look, this stuff's not going away regardless of what argument is made. And it feels like there's a pendulum swinging back and forth between these two groups. And over the last couple of years, the quote-unquote environmental group definitely kind of had momentum.

And now it feels like with Russia, Ukraine, there's kind of a swing back towards the economic incentives, the capitalism, the understanding of energy independence as an important national strategic issue, etc. Like, how do you think about where this ends up? Like, do we eventually get off of coal and some of these things? Or is it just that the economic incentives are way too high and it's nearly impossible? Well, the science doesn't support that. So people think, you know, driving an EV is great for the environment. But if you look at, you know, there's 150 pounds of graphite, graphite is hard coal, there's copper, there's lithium, there's cobalt. All of those things require a tremendous amount of mining.

And with that mining requires a lot of hydrocarbons to actually get it out of the ground and to smelt it into the right form. So there's no such thing as renewable energy. And then there's an intermittency problem with solar and wind, et cetera, that you need the backup of the hydrocarbons anyway. So I think they're not living in reality. So nobody wants to leave the world in a worse off condition, obviously. But you're just not going to transition. You spent 160 years building this global infrastructure using hydrocarbons. And somehow you think you're magically going to leave them tomorrow.

That's just not going to happen. And that's part of the problem. They destroyed a lot of the supply. If you look at what happened in Germany this winter, the price of natural gas went up 1,200%. So, you know, it's costing you 12 times more to heat your home this year than it did in the previous winter because they divested from nuclear, fossil fuels, coal plants, et cetera. And then they put themselves in the hands of Russia. So you see what can happen. And we've done that not to the same degree here in the United States.

We don't have the supply and the demand is going to continue to grow. So you're going to see much higher prices, unfortunately. doing. And to correct that's going to take a long period of time. If you started today, which they're not doing, it would take five to 10 years minimum. So my guess is that you're going to see things get worse before people suddenly realize the science doesn't support what they're saying. Yeah. When you think about things like nuclear, it feels like there is kind of a science argument. And then there is almost a perceived social or mainstream narrative that has really scared people into pursuing those types of solutions.

Do you think that we can get back to letting scientists be scientists and kind of shed some of those obstacles or kind of social friction points? Or is this always going to be something that some of these things struggle with? Yeah, that's going to be a pretty big hill to climb and get people on board with that. Nobody wants it in their backyard. It needs to be along the sea coast generally. You need a lot of water for that. So even though I think the technology has improved there, and I think we should be exploring that, I think nobody's going to allow that to happen.

I don't think that, you know, they tried to build one down in Georgia, you know, $10, $12 billion over cost, and I'm not sure it's ever going to be operational. So it's not a likely solution in the short term. What do you think the solution is? Like, if you could wave a magic wand and get them to do anything, like, what would you do? So I would focus on, I would say humankind is pretty good at avoiding long-term, slow-moving disasters. And if, you know, hydrocarbons and CO2 going into the atmosphere is that problem, I think carbon capture is a great way to go. And I think there's probably technologies that should be worked on immediately to make that happen. So that would be my primary area of focus.

Yeah, it's fascinating. Last year, speaking of kind of commodities, I know you guys started to look at some investment in land. And I don't know if this is the first time you guys ever started to allocate to land or you'd previously had kind of positions and some investment thesis there. But talk to me about land specifically as something that's obviously related to commodities in some form or fashion, but also is a standalone investment opportunity. Well, the best investment that I think is available in the marketplace is something I mentioned to you the last time. It's a company called Texas Pacific Land. It was a trust. Now it's a corporation.

And they own about 880,000 acres in the western part of Texas and just happens to sit upon an ocean of oil. So they derive a lot of benefit from basically people drilling on their land where they retained a royalty interest. and then also crossing their land and putting pipelines, et cetera, to build out that infrastructure that we need. And that's the one area where actually development for energy and trying to get it out of the ground continues to grow. So that land, I would say that 880 acres, if you put a conservative value on it today, is probably worth about $4 billion. If you think we're going into an inflationary period of time and it can keep up with inflation and say grows at 10% per annum, that's going to be worth a lot plus the income that you get from the royalties

from the natural gas and oil, et cetera. The company is still very undervalued, something that we've owned since the mid-1980s, actually, professionally. So I'm not a public market investor by any means, and I don't want to expose myself for you to blast my ignorance or naivety here. But when I Google Texas Pacific Land Corp, the market caps about 10.8 billion, and the PE ratio is 40. When you start to think about these types of assets, is it something where when you say it's one of the best investment opportunities, you guys are looking at the short term or given that you've owned it since you know, the 80s, early 90s, it's more so over the next, you know, 2030 years, this is something that you think is just misunderstood by the

market? I think it's completely misunderstood by the market. So it appears expensive on the surface, but if you do the underlying work to it, you realize actually it's fairly still very attractive. I would say that this year, given where prices are today, I think it probably could earn $70, $80 a share. So it's actually not trading at that high of a price. It's trading at 16 times. And if you look at basically the operating characteristics of Texas Pacific land trust, it rivals the best monopolies you would ever come across in the history of mankind. And if you looked at the performance from, let's say, 2010 through the end of 2020, it's annualized about 42% per annum versus the NASDAQ, I think, was up 21%. Maybe the S&P is up

17% per annum on that basis. And oil and gas companies were actually negative during that period of time. So it looks expensive, but it's truly not expensive. And it's something that I personally buy on a very regular basis. When I wake up in the morning, I say I don't own enough exposure to things that are going to benefit from inflation. And that's, you know, the best opportunity that I see in the marketplace, in my opinion. Yeah, it's yes and 10. It was trading between like 20 and 35 bucks. Now it's $1,400 a share. So up quite significantly in the last 10, 12 years. When you think about inflation, what else are you guys doing? Where else are you allocating capital to protect yourself or to benefit from higher levels of inflation?

So inflation is really a tremendously big problem. And how you navigate this is incredibly tricky because you can be right about being in, let's say, the right asset class. But let's say your ability to pass along price increases are not there. So even though you're able to increase prices for your goods, maybe the cost of your inputs are growing at a faster rate and the employee costs are going up more. So you could be in the right asset class, let's say equities, but you could actually end up with a very poor result because you're not, in real terms, you're not keeping up with inflation. So we've looked at, and we started a fund, it's called the Inflation Beneficiaries Fund, the symbol is INFL. And if you look at that, you go down the list, you'll see

companies like royalty companies, Texas Pacific Land, as I mentioned, Franklin, Nevada, you'll see various exchanges. So financial exchanges, generally they're oligopolistic or monopolistic in character. They benefit from increased volatility and they benefit from increased volume. And there's generally no associated cost with that additional volume or very minimal new cost associated with increased volume. So generally any increased volume falls right to the bottom line. And there's no real capital costs or people's costs as a result of plugging into mainframe computer. So we're trying to find capital light businesses that will benefit And typically from either high trading or from commodity prices going higher, but they don't have the operational risk.

Yeah, it's fascinating because the Texas Land Corporation only has estimated 92 employees, right? $10 billion company, 92 employees, not very capital intensive there, given what they're doing. So and that's up from literally eight employees for the bulk of its existence. It was actually, it's been around since 1880s, and they built out a water business because you need a lot of water to basically do the fracking. So that's only, that 92 is a number that's only come into play over the last, say, five, seven years. Wow, that's fascinating. When you start to think about cryptocurrencies, Bitcoin specifically, as I mentioned at the intro, you all have been paying attention to this since about 2015 in terms of research. in 2017, you started to actually get into the mining business. And from there, I've expanded

a lot of what you're doing in the space. Maybe give us a quick overview. Like, what is the thesis? Why are you all who, you know, frankly, are just arbitraging? You have really long time horizons and tend to be very kind of research driven investors. Why are you so interested in Bitcoin and cryptocurrencies? You know, when I first heard the story, it immediately hit home with me based on supply and demand, basic economics, right? There's a limited supply, there's grown demand correcting mechanism is the price. So I can see how you can make a lot of money at it. But the thing that I mentioned starting off, the crisis in confidence, there's a crisis in confidence in our financial leaders, our legal leaders, our medical leaders, et cetera.

So Bitcoin takes away the ability to print money and to steal time from you. And it puts it into the hands of basically math or an algorithm. And that's a very powerful tool. And for the bulk of history, human history, most of the time, money has actually been in the hands, private hands, not in government's hands. And the governments around the world have used that power. And I think people are going to want to take that back. And I see Bitcoin potentially playing a massive role in that. So there's a possibility, I don't know how it's going to play out, that Bitcoin becomes a reserve currency status. And the world actually puts itself on that standard.

And if that happens, you know, everyone's going to want to own that. I think you're starting to see that play out. And it's almost impossible to keep up with the progress that's being made literally on a daily basis within the Bitcoin community and things that are going there. And you know that probably better than anyone. When you think about Bitcoin's future, I always say that, like, it's pretty obvious it's a great store of value over long periods of time, right? one of the best performing, if not the best performing asset over the last decade, compounding at 150% annually during that time period. And still, you know, relatively small percentage of the global population has any right on the grand scheme of things. And so fixed supply asset,

if that demand continues to, to become pervasive, then obviously the price will go up. What do you think is kind of likely to occur? Do you think that Bitcoin could rise to be the global reserve currency? Do you think it becomes just another asset that central banks put into their reserves? What do you think is the likely outcome here? I think the established powers are going to fight it for time. I think it's inevitable. And I think they're going to get on board with that. So my own assessment is that most people are viewing Bitcoin as still a curiosity. I'm viewing it more as a necessity to fix a lot of the problems in the world. So my assessment is that a single Bitcoin is ultimately going to go into the many millions of dollars. How it gets

from point A to point B, nobody knows. Really, most, not most, every currency has collapsed relative to Bitcoin, as you pointed out. And I think that it's going to continue because I don't see how they get out of this debt burden without continuing to print and to inflate. And I think more and more people are going to recognize that as a store of value and potentially a reserve, the world's reserve currency. So I'm pretty optimistic about it. And again, you don't need a big amount of exposure to this. In that success mode, you'll do incredibly well

and you'll be able to outrun the inflation that I think likely is going to occur. Yeah, I tend to be pretty bullish and I know that you are too. We may have to compete on who's more bullish. When you think about Bitcoin, how is it structured in your portfolio? Is there like a percentage that you try to keep and rebalance to?

Did you just buy some early and that's the position you're going to hold? Or how do you think about it? Yeah, that's really what it was. We immediately, I don't know why this seems to be a problem for a lot of professional managers, but they can't make it up size. We said, we don't need this to be a large size. Suddenly the light went out. What we needed to do is basically put it in as a 1% position,

half a percentage point position and allow it to go and grow. And if we're right, that small amount is going to basically start dominating and have a very large impact on the portfolio. So we did that in 2015, early 2016, bought it professionally, and we've left it alone. And my advice to anyone that's working within our organization is that it's a bigger position now, leave it alone. Accept of volatility. This story has not completed itself yet. And, you know, really what you've risked, you risked 1% of capital back in 2015, early 2016, and let this thing play out. Yeah, it's very fascinating to me, the whole idea of rebalancing. And I always tell people that, you know, let's just use taxes as an example. Taxes is a financial penalty for rebalancing,

right? And if you can basically fight it, just let it go. And if it's your best performers, you're essentially violating the old Warren Buffett line of like, don't interrupt compounding unnecessarily. So it definitely pays to be a Rip Van Winkle investor. And particularly if you can justify the, you know, the valuations, I would say what one of the problems that I'm seeing in the marketplace today, like in the whole rise of indexation that you've seen over the last decade in earnest, is that the top heavy companies now, it's pretty hard to justify the valuations from those. So I don't see how people are going to end up with a good experience from that level of concentration. And I think a big chunk of their success has been that they've been able to pay

employees with stock options. And if they ever had to pay them in cash compensation, you would see that the real profitability of those companies is a lot less. So they've actually been able to outsource or use the marketplace, i.e. the price appreciation of their stock to actually compensate their employees. And I think that could run itself in reverse. If that does, that's not a great area to be high concentration in the, you know, those tech names that we're all familiar with. So I could see you get yourself getting real hurt there. So I'm a big proponent of concentration within portfolios. As long as you can justify the valuation is there. And in the case of Texas Pacific Land Trust, in our portfolio, the very high concentration, a lot of them,

and I still look at it and how I understand it and know it, it looks still very cheap to me and And that's a long way to run. Talk to me about the mining business specifically. I know you guys set up a business that you've been heavily involved in there. But what is your thoughts on mining? How do you guys think about allocating capital to mining versus buying Bitcoin directly? And what are you guys doing? So, well, you can obviously mine a Bitcoin much cheaper than going into the market and doing that.

And, you know, the reason we got into it and it really was led by my colleague, Murray Stahl, is that, you know, if we're going to be involved in this, we should understand it and we should understand it from the ground up. So we started off very small and let's buy a couple of machines, see how they do. And we said, OK, let's buy some more machines. We'll outsource them. We'll put them down in a facility down in North Carolina. That facility got itself into trouble. There was nothing wrong with the business, but they over leveraged the volatility. They weren't paying attention to that. So we went in, helped them refinance. We took a controlling stake in that company. And then we started to build out more.

And then we went into the marketplace and we raised money from investors, institutional investors in some cases. And we did a listing for a mining entity in the not too distant past. And we think that the mining industry itself is going to be a very large industry. And we want to be a player in that. But we take our time. We pay attention to the prices of the machines. Cash does not burn a hole in our pockets. You know, we want to make sure that we're going to get paid back on any machines that we buy and take into account the halving that's coming up in another 770 days. Make sure that we're going to get the delivery on time. We'll pay the right price that that we think we'll get our money out.

So we we we size set a lot of the landmines. My colleague, Murray, I think did a fantastic job. But we're in it. We hope to be in it for the next, you know, 50, 100 years. You know, obviously, I won't be around to see that, but we plan on being that being a part of our business for a very long period of time. And how do you think about allocating to your own mining business versus like buying publicly traded miners or any of the other ways you get exposure to the mining business? Well, you know, so professionally, we have a little bit of a conflict. We were going to buy, you know, our mining entity for them. So we've looked at the publicly traded ones and we're starting a blockchain ETF that should be out in another few months. And they're going to be part of that. Some of those names are actually attractive and we think they're doing smart things and particularly keeping it on their balance sheet.

And if you have a belief, as I do, that the price of Bitcoin is going to go up a lot more, those companies are going to become much more valuable in the future. And right now, I think they're very cheap because they've gotten beaten down in the very recent past. So before I let my brothers ask a couple of questions, my last thing I want to talk about is inflation. It's 7.9% officially. If you look at the CPI basket, I mean, it's just kind of comical how they're calculating some of this stuff. I guess one question is like, what do you think inflation actually is right now? And then two is just how much worse is this going to get? Well, you know, I think Michael Saylor gives a great answer to that. Everyone is different. Everyone has a different basket of goods and services that they're going to buy. But I would

say that the true number for most people, it's running somewhere in the mid teens, probably approaching 20%. And I actually think it's going to be, you know, we're going to see an inflation unlike the 1970s, when we went into that inflationary period in a much better financial condition, we're going to see a much, much more troublesome inflationary environment going forward. So our debt burden is a lot worse today. The lack of supply in the commodities and the oil and natural gas that I mentioned, you can see some really crazy things. The potential, the dollar losing its reserves status. So you can see the price of oil priced in dollars at some crazy level. So it wouldn't shock me if the price of oil got to 200, 300 and then not

too distant future. I'm not saying that's going to happen, but it certainly would not shock me. What can they do? Should they raise rates aggressively and just take the pain? Or what would you do if you if you were the Federal Reserve? So I think they're doing what they know they need to do. They need to talk about raising rates aggressively. I think they're going to raise them a few more times. But if you did that, you would choke off the economy very quickly. The cost of funding would be a real problem.

So I think they're going to end up stopping. And I think they realize that they need to inflate their way out of this. But they want to do it in a way that most people aren't paying attention to it. So my guess is that, you know, rates are not going to rise so dramatically in the future, although I see them, I don't see how they can not do something in the next, at least over the next several months. Yeah, it's, it's fascinating to kind of think through this. Joe, John, what questions you guys got? Peter, thanks for joining us. My question would just be around how you value Bitcoin, right? So from my seat, you're someone who has looked at a bunch of different investment asset classes, and you obviously have kind of different models for each one of them, I'm sure. But Bitcoin is entirely different in my mind, right? how do you think about what's the fair value of Bitcoin is? Or do you just think it's so important right now and is going to be so much bigger in the future that you don't necessarily

worry about that? Yeah, so we do try to look at that. I look at, let's say, the domestic or the global debt market, something like probably easily over $100 trillion, but probably even the United States debt market, where you're getting negative real returns. If you're looking at that, I know a lot of people can't move out because institutionally they have to buy the treasuries, et cetera. But if you're looking at that and you say, if I had to make a bet between that or owning a 10-year treasury, would I have my money in a 10-year treasury of Bitcoin? I think a lot of people are going to come to the conclusion, I should have some exposure to Bitcoin. So they're going to steal from the fixed income market. They're going to steal from the real estate

market. Not steal, the Bitcoin is going to basically take from a lot of different markets. And when you look at all of the money printing that has gone on, the money stock around the world, you're talking trillions upon trillions and trillions of dollars. So if you take that divided by 21 million coins, you come up with an extraordinary number. So I don't know where it's going to stop. I think at some point, it's going to stop. And then it's going to be a very stable asset. And it's going to go up relative to how much other currencies base themselves on an annual

basis. But that number is an extraordinarily high number. So, again, I think my own assessment is that, you know, a single Bitcoin will ultimately go into the many, many millions of dollars. So I'm sticking around for it. John, what do you got? Peter, I'm curious about what conversations you've had with your guys' clients, you and your team, just regarding Bitcoin and what are their thoughts about it, that you guys are a value-based investment firm and you guys are going after Bitcoin? Yeah, so we don't want to be known as the Bitcoin firm. We don't want to be known as the inflation firm.

You want to be known as people that do sensible things with your capital. And we're trying to increase your purchasing power with the passage of time through the investments that we make. So when we first made the investment back in 2015, people thought we were crazy. And we had enough credibility where we say, listen, we're making it a 1% position, a half a percentage point position. So they gave us some slack. Then they saw it working.

And should we take some off the table? And, you know, what I mentioned to Anthony earlier, leave it alone. Let the thing play out. This thing is still very early, early stages. And most people have no concept of what it really is and what it could represent for the world. And the best thing to do is basically leave it alone and let things unfold. And everything that I see, more and more demand is coming onto it and networks are being built out and the ecosystem is growing at a really impressive rate and really intelligent people are behind it. And I think ultimately they're going to win. I think that credibility crisis in the financial world, whether it's the Fed, the Treasury, the political world crisis, I think people are going to be looking for an alternative. And you're going to basically, instead of this globalization, you're going to have this kind of unbundling of that. And people are going to say, you know what? I'm not listening to the experts anymore because they aren't right. I have this better alternative over here.

And one of those better alternatives is going to be Bitcoin. Peter, I've got one more question for you, which I think really just sums up Horizon Kinetics, your approach to investing and the great work that you guys have done over the last number of years. When people look at your investment philosophy, and this is your guys' words, not mine. You say that you're a fundamental value, contrarian-oriented, fact-based investment advisor. You're founded on the belief that a short-term investment approach widely adopted with the modernization of financial markets ultimately produces suboptimal returns and that you believe investors are better served not by taking more risk, but by extending their investment time horizon, which affords far wider ranges of opportunity and valuation than are

available to time-constrained investors. And so what you're essentially talking about here is this time arbitrage and so if we say that most investors in the market today are short time horizon you know viewpoints what is your time horizon is it measured in five years 10 years 50 years like how do you think about okay we're going to extend out that time frame we're going to use that as an arbitrage opportunity uh to drive better returns but how do you come up with what that time frame looks like so so the the best holding period if you find something great is forever right so i mentioned that Texas Pacific Land Trust, we purchased it professionally in 1985 and we hold it today. And I'm still telling you that it's a tremendous opportunity. So obviously we're

talking decades, right? So really we're trying to find things that have long-term product life cycles, things that have great degree of predictability. And as long as the valuations don't become too excessive, leave it alone and let the businesses compound for you. And what will happen is that your portfolio will naturally undiversify. Your best companies will move to the top. And as long as those companies still have the same operating characteristics and aren't trading at crazy prices, best thing to leave it alone. And you'll capture those business returns. And if those business returns are much better than the S&P 500, with the passage of time, you'll end up with a much better return than the S&P 500. So it's really kind of Buffett-esque

in its approach. Now, Warren Buffett and Charlie Munger don't like Bitcoin, and they've called it rat poison. I'm not sure they quite understand what this potentially means. And again, we're not so stuck on something that we can't say we can allocate a very small amount of our capital. And now this is going back when it was a much more white knuckle phase for Bitcoin. And let's see this unfold. And Bitcoin is not a cash producing asset. It's essentially like a currency potentially or gold. It's a store of value. And it may become the reserve currency of the world. And who knows what that's going to be worth? I think it's going to be worth in the many trillions of dollars. And when you see some of the assets or investments that you've made

previously continue to rise, what is the period that you check in on valuations? And is there a framework that you use to say, hey, look, you know, we really like the fundamentals, but it's just too expensive right now. We got to diversify from it. Like, what does that process look like? Yeah. So we like to think that we practice what we call intelligent inactivity, right? So we buy something, we have an investment thesis and our job literally every day and going to the library and sitting down and reading is to poke holes in our own investment thesis, right? We already believe something. So can we find a credible, you know, argument that, hey, we're wrong in our thinking. And if we're wrong in it, how bad will it be for this investment? And it could be

catastrophic. Let's get out of it as quickly as possible. So that's really what we try to do. It's like we're sitting there. Is there some competitive thing that's coming on in the horizon? So the development of the Internet actually had a had a very large influence on the profitability of a lot of industries. And if you were not paying attention to that, you could have gotten hurt. So things that were formerly great businesses, let's say the Yellow Pages, as an example, or your maker of calendars, et cetera, with the iPhone, that business is going away because of the advances in technology. So your job, our job is to really pay attention to the underlying investment thesis and then make sure that you're paying attention to any dangers that kind of invalidate that investment thesis. And, you know, if it's not a good investment thesis, there's no right price. You have to get out of the position.

But if it's good, leave it alone and let it compound for you. Yeah, it's really it's really fascinating kind of how you guys are so focused on the inactivity, buying great things, long time arbitrage. So it shouldn't surprise people that you also have this culture of writing. And I know that you guys put a big importance on being able to actually articulate the investment thesis in writing. Talk about why that's been so important over the years. It slows the investment process down, right? So I wake up in the morning. I think I'm the right guy.

Let me go to the office. I came up with a great idea that I thought about while I was getting ready for work. Let me go act on it. Let's stop that immediately. So a lot of times you put pen to paper and you realize that your great idea is actually a horrible idea. And what you thought was going to be a good long investment might actually end up being a better short investment. So when you start slowing the investment process down and you start working through the qualitative and quantitative aspects of any investment, it helps you think better. And I think you understand because you write a fair amount yourself.

It basically clarifies your thoughts. It allows you to speak more intelligently on the topic, and it gives you a better insight as to what the investment is going to do in the future. I couldn't agree more. If you had one thing to leave everyone with, there's a lot of young folks that are watching this. Many of them would dream of kind of having the career that you've had and the success that you've had. What's the one thing that you wish you knew when you were first starting out that many of these young folks would benefit drastically as they go into investment careers? Yeah. So we don't have a perfect roadmap. I would say one of the best things to do is actually just start, right? So the way we started, we were value-oriented investors. We started the internet

mutual fund. The story behind that is actually an interesting story. We jumped in a car, we went down to Valley Forge, Pennsylvania. We met a guy who was running a mutual fund out of his living room. Every professional told us it was going to cost us a couple of hundred thousand dollars to start this fund. We didn't have a couple of hundred thousand when we were starting it. And we said, this guy is doing it for virtually nothing. And he gave us an education. We paid him a couple hundred dollars for the education. We came back and we said, okay, we can do this on our own.

So it wasn't so much that we thought we had some great opportunity, but I would say that the fact that we actually, we studied the situation, we saw the opportunity and we acted on it. So if you do that, don't hesitate, don't doubt yourself, act on it. And if you make a mistake, that's a learning experience that you'll gain from as well. So a lot of it is people paralyze themselves, and I think taking action is actually a great way to move ahead in life. Yeah, that's fantastic advice. Where can we find you on the internet or send people to find more about Horizon Kinetics?

So me personally, I'm not too out there, but Horizon Kinetics, you can find us at horizonkinetics.com. We have a number of mutual funds. We have a new ETF that I mentioned that we launched a little over a year ago that's done incredibly well. I think it's great. Inflation heads, my colleague James Davalos has done a fantastic job with that, runs that. Symbol on that is INFL. If you have an interest and you're concerned about inflation, that's certainly one area to be looking at. Go to our website.

Read our research. If you don't think the research is any good, it makes it easy to walk on by us. But I think most people that read the research say these people are thinking about things. I tend to think you're doing a great job. And my, my question about you on the internet was just the opportunity for you to tell everyone you're not on the internet because I've had multiple people after the last time you were on the podcast, they were like, Hey, where can I like find what he's publishing? And I was like, ah, you're gonna have to go to the website.

I don't think you're going to find him tweeting or providing any analysis on LinkedIn. So good luck. That's right. All right. Well, thank you so much for coming on. We appreciate it. I literally could talk to you for hours and, uh, and I just appreciate all the work you're doing.

Anthony. Thanks for having me guys. Nice meeting you for the first time. thank you for coming on all right see you later peter bye bye thanks so much for listening to today's episode i really hope you guys enjoyed this one make sure you're subscribed on apple spotify or your favorite podcast player and if you're looking to try to transition to get a new job in the bitcoin or crypto industry we've got you covered head over to palmscryptocourse.com we've developed a curriculum with the top teams across the industry it's a three-week intensive

training program with over 50 events packed into that three-week time period. Go to pompscryptocourse.com to learn more, and I'll meet you guys for the next episode.