We Study Billionaires - The Investor’s Podcast Network - TIP465: Value Investing in the Digital Age w/ Adam Seessel

Starting point is 00:00:00 You're listening to TIP. My guest today is Adam Cecil. Adam is the founder and managing member of Gravity Capital Management and also the author of a great new book titled Where the Money is, Value Investing in the Digital Age. The traditional value investing strategies are often rendered ineffective when it comes to tech companies like Amazon, Apple, Google, and the like. Adam has devised a way to standardize tech companies so that value principles can be applied to these high growth companies and potentially give you a new perspective on the like.

Starting point is 00:00:30 their value. In this episode, you will learn why billionaire Bill Ackman says Adam's new book is one of the best investing books he's read in years, Adam's business management and price or BMP checklist, why value investors should reconsider investing in high growth tech companies, why generally accepted accounting principles or gap do an injustice for tech companies, the concept of earnings power and how it changes the net present value, how tech companies use new return on capital metrics like customer acquisition costs and lifetime value and a whole lot. more. Adam's new book is very approachable and he does a masterful job at distilling down complex topics and very easy to understand examples. I thoroughly enjoyed our discussion and I know you will

Starting point is 00:01:10 as well. So without further ado, here's my conversation with Adam Cecil. You are listening to the Investors Podcast where we study the financial markets and read the books that influence self-made billionaires the most. We keep you informed and prepared for the unexpected. Welcome to the investors podcast. I'm your host, Trey Lockerbie. And today I am super excited to have on the show, Adam Cecil. Welcome to the show, Adam. Trey, thanks so much for having me. I'm thrilled because I just finished your new book called Where the Money is, Value Investing in the Digital Age. This is a very topical discussion. And your book is getting praise from many notable investors, including Joel Greenblatt and Bill Ackman. And in fact, Ackman says that it's one of the best books here. he's read on investing in years. So before we get into the book, I actually saw some recent comments from Bill Ackman about

Starting point is 00:02:15 the markets today. And I thought it'd be kind of interesting to discuss. And essentially, what he said is that people are not realizing that a recession is actually calculated from net negative GDP growth, meaning after it's adjusted for inflation. So with inflation nearing 9% now, it would be very unlikely a comparable number for GDP would manifest itself, right? I mean, we'd have to really be going above and beyond there. So, therefore, it's almost inevitable that pundits will talk about this recession that we're currently in. But the reality is that unemployment is at all-time lows and consumer spending

Starting point is 00:02:53 is still pretty strong. It's trending slightly downward, but it's still up. And I'm wondering if you see the markets the same way Ackman does today. Not really, Trey, to put a fine point on it. I'm a bottoms up stock pick. And I really believe what Peter Lynch wrote, you know, 30 years ago. He wrote these books when I was getting ready to go on the Wall Street, and they really inspired me. And when I was going to write my book, I went back and reread them. And the thing that stuck with me the most of what he said was that, you know,

Starting point is 00:03:25 superior businesses in the end win in the real world. And that victory is over time reflected in the stock market. And it's the same with mediocre businesses. They will fail or languish. and that performance will be reflected in the stock market. So the economic cycle is going to do what it's going to do. Macro is going to do what it's going to do. Interest rates are going to do what they're going to do.

Starting point is 00:03:48 There's going to be wars. There's going to be plays. There's going to be pandemics. There's going to be recession. But if you have a strong business with a strong customer value proposition and a moat to protect that business, you are going to win, period. And that's really how I approach the market. That makes all kinds of sense to me.

Starting point is 00:04:06 And I thought it was an interesting point because there's a lot of doom and gloom out there. In fact, I'm seeing indicators showing that people are very fearful in the markets. And there's a lot of talk of recession. And we may in fact be in a recession. But I think Bill's point is more or less that we are in a recession almost by default, like on a technicality in some ways because inflation being where it is. And the problem with that is that it can be a self-fulfilling prophecy to some degree. right. Once people hear that we're in a recession, they might decide to travel less or they might

Starting point is 00:04:37 try and penny pinch a little bit more. And it might actually manifest into a worse recession. But to your point, I love this perspective of just sitting back and letting the market do what it does and just focusing on the micro. And the more I study macro, the more I'm actually in agreement with you. Look, Trey, there's a reason they call economics the dismal science, you know, I mean, because it's a thicket of weeds. And I think that's the reason that, investors like Bill Ackman and Joel Greenback like the book is because it's very common senseable, very down to earth. On the one hand, it takes a big macro trend, which is the rise of technology and the digital age, which is a macro trend. I mean, that's definitely a

Starting point is 00:05:17 macro trend. We're in a time of technological change that we haven't seen in at least 100 years, you know, since Henry Ford and the Model T. On the other hand, it's very micro in the sense is okay, in that context of technological change, how can we profit from it? And the way to profit from it is to focus on individual digital businesses that have competitive advantages. And the competitive advantages are really important in this kind of environment because you have to have pricing power, right? With that inflation going up, you've got to have a mode so you can increase your prices

Starting point is 00:05:49 and keep up with it, not all businesses can. Yeah, it's funny. When inflation reared its ugly head early this year, I went back in Red Buffett's the writings on inflation because like many value investors, he's my guru. And it was in the early 80s, when inflation was at its apogee. And he said, you know, the two things you need are pricing power, like you said, and capital light business models. So you don't have to invest a lot of money in plant as the prices are going up. We've getting more and more expensive to build property and plant equipment. So which businesses have pricing power and are capitalized? Tech. So, you know, it's a

Starting point is 00:06:27 great period to stop and reflect. And if your listeners have time, you know, I do recommend they pick up for book because it does take the secular trend of technological change and it applies to how we can make money in the market. And, you know, right now, a lot of companies are getting slaughtered in tech. And they deserve to be slaughtered because they have no competitive advantage. But then there are a few, you know, sub-5 percent that do have competitive advantages and they're also getting slaughtered. And those are the ones I'm buying. Well, one in particular there, and we're going to talk more about this company, I think, in a minute. And I want to just preface all of this by also saying we're going to dive deep into your framework

Starting point is 00:07:06 and how we can kind of recalculate earnings on these tech companies to make better sense of them. But one that comes to mind is Alphabet. And when you look at their earnings, they are what they are to your point. And they keep their prices really low. And that's what tech is usually good for. But I hope no one from Alphabet is listening. But my whole life revolves around Google. And my point is that, you know, even if they raise the price from, you know,

Starting point is 00:07:27 a dollar 99 to even a hundred bucks a month. I probably pay it. Most of their products are free. But as you say, they enable your life and make your life so much better, faster, cheaper. As I say in the book, that's the mantra of tech, better, faster, cheaper. And I quote this study done by an economist, I think he was at MIT at the time, where he went and asked consumers, how much would you forego of your income in order to keep a service? So I think Facebook was $400 and WhatsApp was $700. And Google Search was $17,000 a year, which is like 30% of an average person's income. Now, it's just a theoretical question.

Starting point is 00:08:08 I'm sure people wouldn't pay $17,000 a year for Google Search. But it did directionally indicate how, as you say, valuable these tech companies in general and Google Search in particular have to come in our lives. So a lot of these tech companies get often misvalued because of these metrics that everyone's using for different kinds of businesses that are more manufacturing involved or just more traditional in general. And I kind of want to stick on this topic of GDP and how it relates. I was recently having a discussion with Jim O'Shaughnessy and we were breaking down the calculation of GDP and why it's becoming less relevant. And in a much similar way that you describe some of these metrics in the book, GDP is also influenced by manufacturing. manufacturing businesses and they're not really factoring what the tech sector is bringing to the party. So what are your thoughts on how GDP is calculated today? And how would you calculate it, given

Starting point is 00:09:00 the strategies you outlined in your book? We're not measuring important economic developments in our economy. And it's precisely because they're very hard to measure. Every time tech makes something better, faster, cheaper, it doesn't necessarily get recorded in the stats. And you just have to understand that, you know, these measures like GDP and generally accepted accounting principles, which I talked about in the book, they were built for the industrial age. You know, they were built for a time when GM and U.S. Steel ruled the landscape. So I think the economists, the econometrics people, the accounting people need to update these systems to account for tech. I mean, even things like inflation, I think inflation has been benign for 40 years. I think a lot of it has to do with tech.

Starting point is 00:09:47 Tech is so disinflationary. You know, before Google, we needed encyclopedias, you know. Before Google, we needed Google Maps. Before WhatsApp, you needed to spend a fortune to call India. Now it's free. So all these things tamped down pricing because tech builds better mouse traps, better, faster, cheaper mouse traps. And that's a big, big, big disinflationary force on the economy that although I'm no expert, I feel pretty sure it's not being measured.

Starting point is 00:10:18 To that point, I mean, it's a very archaic method they're using, as I understand it. They're essentially putting people in the field. I think it's roughly 500 people across the country just with an iPad taking surveys of folks. And you'd think this day and age, they could just source from Visa or MasterCard or some company to actually see what spending is really doing. But instead, we're kind of taking these very kind of arbitrary approaches. It's kind of mind-boggling in a way. And the only reason I bring it up and I'm kind of sticking on it is because, it seems to be driving so many big narratives in the market. I mean, with the recession and how it

Starting point is 00:10:50 relates to inflation, et cetera, et cetera. But beyond that, I want to shift focus a little bit to the frameworks that you outline in your book. So first of all, I'd like for you to start off with just describing or walking us through this very simple BMP checklist. Well, this is a checklist I devised for myself over the years. And, you know, like an airline pilot, that's where the checklist started, actually, the cockpit. So they, avoid error prior to takeoff. You know, have you done this? Yes, have you done this? So, you know, my investment checklist, as you say, revolves around three central variables, the quality of the business, the quality of the management, and then the price you're being asked to pay. So BMP, for sure.

Starting point is 00:11:31 So, you know, as I say in the book, those are the three most important variables in my experience, to superior investment. So business quality is the most important metric. If you start out with a crummy business, it doesn't matter what you pay. The business will fail. and degrade and eventually go out of business. So there can be, you know, at some point, no price is cheap enough to buy a failing business. You have to have a business that has competitive advantages. You have to have a business that has a secret sauce, an edge. Buffett called it a moat. If you don't have that, capitalism is so fiercely competitive that its excess profits will be competed away relatively quickly. So quality of business, business quality is the

Starting point is 00:12:12 most important. You know, after that, there's management. You know, in the book, I say, Google probably has a better business pound for pound than Amazon, totally asset light. Every incremental search is potentially 100% profit margin. You can't say that about every incremental package that Amazon delivers because they have to build at a certain point more warehouse space. So Google is a better mousetrap as a business, but Amazon has been the better stock. And that's because Jeff Bezos is the greatest tech manager out there. He started a hedge fund. So he understands these financial concepts. He was an electrical engineering major, but then he also started his career at a hedge fund. So he's married old school business principles with new age.

Starting point is 00:12:55 You know, he understands the digital economy, but he also understands the principles of gravity in terms of what drives value in a business. So management is very important. And then price. And price is also extremely important. You know, I wouldn't call myself or I couldn't be able to call myself a value investor if I didn't think price was sort of the veto question. So you're going to have a great business. You have a great manager. But if the price isn't right, you're going to have a crummy investment. So you have to be very careful about what price you pay. And as you suggested earlier, a central problem that I wrestle with in the book is these tech companies have looked expensive since they IPOed. And yet they've appreciated thousands of fold. So that leaves us

Starting point is 00:13:38 with an existential question, you know, either were due for a job. dot-com bust like we've never seen before, or the metrics that we've used to calculate price are wrong. And I conclude that the second premise is true. I totally agree about Bezos, and he's also a student of Buffett, probably not surprisingly. I also want to just highlight something really small you threw out there that we're going to get into a little bit later around price, but you described it as the price you're being asked to pay. And this to me is like similar to, you know that Declaration of Independence here in America where it's like that you have the right to a pursuit of happiness, right? Not just not so much happiness, but the pursuit of it. And similar

Starting point is 00:14:19 with price, that little reframing you just did there, almost subconsciously, is so important because you're remembering that, hey, the market is just offering this to you. You don't have to take it. I think a lot of people get tripped up there. Very interesting. All right. So you highlight in the book that roughly, I'm quoting now from the book, roughly half of the U.S. markets gains since 2011 have come from the tech sector. And since 2016, roughly two-thirds of the market's appreciation has come from tech. Now, this is kind of going up to 2020, so it's probably even gone a little bit more than that with the COVID boom we saw. So obviously, tech is not going anywhere anytime soon.

Starting point is 00:14:59 So if we're to look at tech companies from the lens of a value investing framework, what are some of the most compelling advantages from this tech sector in particular? Well, there are many, Trey. I mean, let's first start with probably the most important one, which is tech companies don't produce anything physical. Their raw materials are zeros and ones. And so they have no cost of goods to put it in accounting terms. Coca-Cola was probably the best late-20th century business model. Their cost of goods was sugar and water. And then they had to sprinkle pixie dust over it to make people believe that, you know, Coke is the real thing. And tech companies don't have to do that. Tech companies don't even have to buy sugar or water. They just hire engineers and a bunch of laptops and off they go. There's no

Starting point is 00:15:48 physical cost of goods. So an average tech company, a good tech company, a software company, will put up 80 to 90% gross margins. So they'll immediately have a 30 percentage point head start or even the best of the consumer package company, you know, even better than those. So, So then you move to continue with a Coke parallel. Coke is a branded company. And when they want to expand, they actually have to physically expand, you know, into Indonesia or South Africa. They have to build plant and bottling plant and trucks and vending machines.

Starting point is 00:16:25 They often have subsidiaries to it, but still, it is capital intensive. You know, when Google wants to expand in its geography, they don't have to build any plant. They don't have to move anything around except zero. and ones. I mean, some engineers somewhere hits deploy, and boom, new geography. So it's very high margin because they have no cost of goods. It's very high return on capital because they have no few physical assets. And then you get into things like, you know, once people have figured out that Google is the best search engine, people standardize on it. So there's network effects. So the more people that use Google, the more advertisers want to use advertise on Google

Starting point is 00:17:04 and Google has more money to make their search network better. And, you know, this virtuous circle goes around and around. You know, Airbnb says more guests, create more hosts. And more hosts create more guests. So you have this sort of winner take all or winner take most dynamics that you see in, you know, categories like online search and e-commerce and social media and short-term home rentals. So for many, many reasons, these companies are just sort of the biggest, baddest, economic beast ever created. I mean, they're just really, really powerful business models. Asset light, high margin, and people tend to standardize on them. Google makes seven times more money than

Starting point is 00:17:45 Coke does. And Google's only been around 20 years. You outline here in the book that if Ford wants to grow its business, it must invest $10 to produce $1 in profit. Coke requires about $6 and Facebook only $2. I mean, that's dramatic. helps put it into perspective. It's pretty insane. You also have this theory in the book that I agree with where a lot of millennials know about technology kind of naturally, but not markets. And older, wiser investors know a lot about markets, but maybe not so much technology,

Starting point is 00:18:21 aka Buffett, right? Or someone like that. So I think this stems from this lingering effect of the dot-com bubble mixed with the 2009 global financial crisis, where a lot of millennials got really, I guess, gun shy with the markets in general, they probably didn't have that natural inclination to go learn about it. So when you hear about Amazon having a PE ratio of nearly 100, you might be inclined to just make a snap judgment that were in this bubble similar to the dot-com bubble. But maybe outline for us how far tech has really come since its first bubble.

Starting point is 00:18:56 Well, first of all, I'm really glad you picked up on that point about the millennials. You know, I say, you know, millennials understand tech, but the first of all, I'm really glad you picked up on that point about the millennials. they're afraid of the markets. And older people like me understand markets, but they're afraid of tech. And the book is really my attempt to come to terms with tech. And I write there that my son, who's a 26-year-old software engineer, who is one of my best teachers, when he can keep his patience with me, that is. But yeah, look, I mean, what I say in the book is to millennials, I understand why you would be shaken by the markets. You know, you've had, as you say, the dot-com bust, then you had the great financial crisis, then you have the pandemic. You've had things.

Starting point is 00:19:33 three major crises in your life. So I said, I get it. I understand. But on the other hand, be rational. You know, look at the data. I mean, you know, have your emotions, of course, but then, you know, move to the data, which says it since 1988, which is the sort of the mean year of the millennial birth years. The stock market is compounded at 11% a year, which is better than it has over the last 100 years. So the market remains the best place to build wealth. And there's sections in my book about crypto and meme stocks and ESG investing. And all of them, I think, are basically, you know, people being disaffected by the markets and trying to find some alternative. And I'm proposing in the book, look, my alternative is invest in what you know,

Starting point is 00:20:18 which is tech. You have an edge over me. You, Trey, and your millennial friends have an edge over me because you understand TikTok better than I do. You understand this stuff better than older people like me. So use your edge. Yeah. And then, you know, then we're going to getting into the more technical stuff about price. But I say in the book that I think Amazon's average P.E. multiple sense that IPO was 150 times earnings on reported earnings. And for about a third of their life, they have not had reported annual earnings. They've had losses. So as I say, in the book, Bezos would have folded up his 10 a long time ago if those numbers were right. It's just, they're wrong, the gap financials are wrong. We've got to make adjustments into the numbers,

Starting point is 00:21:06 because as you suggest, Trey, Google, Alphabet, take your pick, these companies are not going away, you know? I mean, back 20 years ago, yeah, there was a dot-com bus, but as I said earlier, Alphabet makes seven times more than code now. Like what? Those profits are just going to evaporate? Like, what? You know, Amazon sells more as much stuff, maybe a little more now than Walmart. Mark. These companies are here to stay. Now, there is a secondary dot-com bus going on in the market now in mid-22. You know, a lot of companies came public, SPACs, their story stocks, they're not making money, they don't have any competitive advantages. Carvana comes to mind. Those stocks are getting crushed, and those stocks probably deserve to be crushed. You know, you have to make a distinction

Starting point is 00:21:53 between temporary impairments of value and permanent impairments of value. So that's the babies in the bathwater, you know, and that's the trick right now is to find the babies. And if you make these price adjustments, you'll see, in my opinion, that stocks like Amazon, Google, are exceedingly cheap. Let's take a quick break and hear from today's sponsors. All right. I want you guys to imagine spending three days in Oslo at the height of the summer. You've got long days of daylight, incredible food, floating saunas on the Oslo Fjord. And every conversation you have is with people who are actually shaping the future. That's what the Oslo Freedom Forum is. From June 1st through the 3rd, 2026, the Oslo Freedom Forum is entering its 18th year bringing together activists,

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Starting point is 00:26:16 That's Shopify.com slash WSB. All right. Back to the show. I think it's important to note that you're not advocating to invest in tech just for tech's sake. It's, you know, these companies are just as prone to severe competition as any other industry. And you were talking there about the competitive advantage. And Buffett's term being a moat is easy to understand. But I've actually found that putting it in practice can be a little bit elusive.

Starting point is 00:26:44 So, you know, Elon's recently said that moats are irrelevant because all that matters is innovation. So that's kind of a distraction in some ways. So how do you determine if a business has a strong mode? Well, it's a good question and a multi-layered question. And you're absolutely right. 90 plus percent of all tech businesses are going to go the way of 90 percent plus of business in every other industry, doomed to failure or mediocrity. I mean, anyone who's been spent any time in the business world knows it's brutal out there.

Starting point is 00:27:13 It's the hunger gains, man. I mean, people are going after one another. And especially in tech, I mean, tech is especially brutal. Move fast and break things. you know. So you've got to have a secret sauce. And I read Elon Musk's comments and I thought about him. And he's absolutely right. The innovation is critical. But like many things Elon says, you know, it's a little disingenuous. So Tesla, for example, has a couple of modes that I'm sure he would hate to give away. I mean, his first mode is his brand, right? He has 100% brand recognition.

Starting point is 00:27:50 Tesla is an amazing brand, and he'd hate to give that competitive advantage away his brand. And the second mode he has, which is less obvious, is because they make, I think, what, two-thirds of all electric vehicles, and they've scaled up like a classic manufacturing business, their unit costs are 25% less than the competition. So he has a secondary mode, which he has a low-cost model. So he can say all he wants that modes don't matter. But if you went to him and said, okay, well, we're taking away your brand. And we're taking away your cause of that.

Starting point is 00:28:21 And she's like, wait, wait, wait, wait, a second. You know, it's like his bit for Twitter. He takes it back. But anyway, to your question about moats, I actually find it easiest tray when I think almost like a 12-year-old. Like, I don't over-complicate it. You may be, I don't know, but you may be over-complicating things in the sense of, you know, just ask yourself, who's taken a run at this company historically and failed?

Starting point is 00:28:47 or you could even say who could take a run and sort of game theory it out. How could they tunnel under the moat? So let's take four companies, and I won't dwell too much on them, but let's take four discrete companies, and we can go through the moat or lack thereof. So Google or alphabet, you know, which used to be called Google. So Microsoft spent $15 billion a year trying to beat Google and search. They have a less than 5% market share. Less well known. Amazon took a run at Google and search. Some years ago, Bezos hired the guy who wrote the first search engine, developed the first search engine for Yahoo.

Starting point is 00:29:28 He said, build me a search engine so we can compete against Google. A couple years later, the guy quit and he left. For Google, he went to Google. Apparently, Bezos had a huge temper tantrum. So after that, he said, you know, treat Google like a mountain. You can climb it, but you can't move it. So that's the kind of business. That's like the archetypal moat. Even, you know, even the business didn't say mode. He said, Mountain, you want a mount, you want a tank, you want a battleship. Pick your metaphor, but you want a business that competitors have tried to go after and can't or, you know, game theory it out. You know, Amazon, same. 50% share of e-commerce. Walmart, six or seven years ago said, we got to get into this game.

Starting point is 00:30:10 They tanked margins by a lot. They spent a lot of money on e-commerce. You know what their market share is now of e-commerce? Six percent? Yeah, it's close. Seven percent. I read your book, so I... Yeah, right.

Starting point is 00:30:21 Yeah. So anyway, you know, if Walmart, the biggest retailer on earth tries to make it run on Amazon and makes, you know, has a less than 10 percent share, pretty good sign that it's hard to replicate that business. So then the other two that I've never liked, and I'll tell you why, and it's just, you know, all trying to help you and your listeners develop sort of thought patterns for moats is, I've never like Netflix, you know, never made sense to me. I never understood what Netflix's boat was.

Starting point is 00:30:52 Like, they make movies and put them online for people to stream. Like, anybody can do that. So I thought, and sure enough, that's what's happening, you know. I mean, Hulu, Apple, Amazon, Paramount, Disney, I mean, keep going. And some of these companies are actually have an edge over Netflix because they have original content. They have content libraries. They don't have to keep spending on.

Starting point is 00:31:18 Disney has a huge back catalog. They can just put out there and the costs are already spent. So I never got Netflix. And I think, you know, look, Netflix might appreciate. They might figure it out. And by the way, if they start moderating their content costs, I'll be interested. But until then, it's just an arms race. It's an arms war.

Starting point is 00:31:38 It is literally hunger games where they're all out there saying, I'll spend $10 billion. No, I'll spend $15 billion on content. No, I'll spend $20. And it keeps going up and up and up. And who wins? The consumer, but not the company. And then the other one I've never liked, which is getting its comeuppance is Facebook.

Starting point is 00:31:55 You know, Facebook has many of the characteristics I've described, you know, network effects and winner take all, asset light and so on and so forth. But on the other hand, Trey, they never had like the best social media site. Like, no one ever goes, oh, it's awesome. Like, you and I would never rave, I don't think, about Facebook, the way we would rave about Google, right? It's just like people are on it. People are on it because people are on it. And that makes them very vulnerable.

Starting point is 00:32:22 And if you look at the history, you know, WhatsApp came along. People started getting on WhatsApp. Zuckerberg bought WhatsApp. You know, Instagram came along. People started getting on Instagram, bought Instagram. And then when people figured out that he was buying up his competitors, TikTok came along. He couldn't buy TikTok. And TikTok is now taking users.

Starting point is 00:32:42 So you have to have an edge. You have to have secret sauce. And those are just a few examples of how I think through, you know, whether you have a moat, whether your business is protected for, you know, 10, 15, 20 years. And we can talk about others if you want. But even to that point, right, Facebook has now 3.5 billion users. I mean, half the world's population, more or less. And so that has to be worth something, obviously. To your point, people are on it because people are on it.

Starting point is 00:33:12 But the level of disruption, I think just from that network effect being so far ahead is worth probably quite a bit. I think there's not to pick a bone because it's still a lot of numbers, but I think Facebook, as a company, has three billion monthly users and two billion are on, you know, blue Facebook. So it's only two billion. It's still a lot of people, to your point. But, you know, Trey, those network effects can unravel as fast as they ravell, you know. I mean, network effects happen very quickly, and when they unravel, they unravel very quickly.

Starting point is 00:33:45 I mean, we've already seen this. Look at Yahoo. Remember when Yahoo used to be the biggest search engine? And then Google just made a better, faster, more relevant one, you know, all of a sudden, down the tubes. So if people decide to congregate elsewhere besides Facebook, it's kind of going to get over real quick. And it seems like that's starting to happen with TikTok. And I think that's why the company is now called Meta.

Starting point is 00:34:14 And he's making this $10 billion a year bet on an unproven technology. Could work. Could be huge. Could have first mover advantage. But it's not, you know, I don't bet on miracles. I bet on moats. And we'll see what happens in the Metaverse. But right now his core business is very vulnerable and I think he knows it.

Starting point is 00:34:34 Yeah, I'd be curious to see their active users. and I imagine that's kind of declining. I, for example, have a Facebook. I haven't touched it in probably five years. So I wonder how many people are like that to your point. All right. So I'd like to dig in a little bit on the accounting issues at hand. You mentioned the Gap accounting rules that everyone is regulated by on the stock market.

Starting point is 00:34:55 The intention for this is to try to standardize financial reports across thousands of different businesses with very different business models. But what are some of the biggest flaws from using Gap? on tech companies? Well, you just have to start in the historical context, tray, you know, Gap, generally accepted accounting principles, which is what the SEC basically requires all companies in the U.S. to follow was promulgated in the 1930s after the Depression. The federal authorities said we need to standardize accounting so that investors know what's going on.

Starting point is 00:35:31 And in the 30s, General Motors, U.S. steel, Ford, coal companies, they were the big companies out there. And so the rules were built around industrial companies. And the central problem, which we've talked about here and there so far, is that in accounting, the definition of an asset is an expenditure by a company that has a projected life of more than one year. So if you build a house, that's an asset, not an expense, because you're going to live in your house for more than a year. But your water bill is an expense because you use your water immediately. So an expense is categorized is something that has less than a one-year useful life. So factories have a 20-25-year useful life roughly, depending on the factory. So if I spend $100 on a factory and I'm U.S. Steel or General Motors

Starting point is 00:36:18 and it has a 20-year useful life, every year I expense $5 of that $100, right, 100 divided by 20 years is $5 a year an expense. But R&D expenditures, which are the lifeblood of tech companies, R&D in a sense is the plant. It is the factory. It is the wheel, the engine room of a tech company. Well, accounting rules now say that all those expenses must be the vast majority, 90-some percent, must be expense immediately. So if you're an industrial company and you have $100 of revenue and you spend $100 on a new plant, you only expense $5 of that.

Starting point is 00:36:59 So your profit is $95. But if you're a tech company and you have $100 of revenue and you spend $100 of R&D, because all those $100 are immediately expensed, your profit is zero. So tech companies have underreported earnings, basically, because of the outdated tech accounting rules. They will change, I think. But until they change, we as intelligent investors need to make adjustments. And to your point, as we just mentioned with Facebook investing tens of billions into the metaverse,

Starting point is 00:37:32 I mean, those are immediately expense, even though that technology, could live on and produce revenue over years to come. It's a good point. And I would argue that they should be expense. And if you think about the history of R&D, you know, back in the 50s and 60s, all R&D was a moonshot. It was like some guys in the back with a beaker and stuff,

Starting point is 00:37:54 figuring out whether they could come up with a great new product. So, of course, it should be expense over one year. But now with these giant companies, you know, like Google spends a lot of money tweaking its search engine. They tweak the search algorithm twice a day to make it better, faster, more relevant, to keep the moat durable, to throw sharks and alligators in the moat to make sure that nobody can get that. But all those expenditures are expensed. And of course the expenditures on their search engine has a multi-year life. It's obvious, but not a gap, doesn't recognize that.

Starting point is 00:38:29 Similarly, every dollar that Amazon spends on its e-commerce website, expensed every year. What are you talking about? Of course it has a multiple year life. It's building out the mode. So R&D expenditures used to be speculative and some still are speculative, but many, many, many are not. Interesting distinction there. So now you can start to imagine that there's likely a different method we should be applying to tech companies to find their true value, which you've described here. And I'd like for you to walk us through the concept of what you call earnings power and also harvest mode. and describing those two different strategies. Let's use Amazon as an example. Basically, the theory of the concept tray is that comparing Amazon to a mature company like

Starting point is 00:39:18 Wells Fargo is like comparing an apple orchard in the spring to an apple orchard in the fall. You know, one is ready for harvest. Wells Fargo is ready for harvest. It's not going to grow a lot. Well, you know, a basic bank. It's mature. So, yes, they spend money on marketing. and you know, this and that.

Starting point is 00:39:37 But they're basically in profit maximization mode. They're trying to bring every dollar they can down to the bottom line. So their margins are going to be very high. Digital companies are in the opposite camp. They're like an apple orchard in springtime. The apples aren't right yet. You don't want to pick them. You want to be plowing money back into the fertilizer and pruning and all that stuff.

Starting point is 00:39:58 You know, Amazon just now caught up with Walmart in terms of retail spending. They only have a 5 or 6% share. of total U.S. retail spend here in this nation and 1% of worldwide retail spend. So they have enormous headroom to grow, so they're going to reinvest in their business. So when you take the accounting problems, which we just talked about, and then you take the reinvestment opportunities, basically there are profits that they're reporting are not at all what their earnings power could be. And I define earnings power as sort of a latent underlying ability for a company like Amazon or Google or any tech company, really, to produce profits when they get to harvest mode like Wells Fargo.

Starting point is 00:40:42 So we can walk through the segments if you want of Amazon. I don't know how deep you want to go. Let's go deep. Yeah. So what you're saying right there is essentially if we go back to gap accounting where you're trying to standardize all businesses to each other, what you're essentially doing is standardizing high-growing tech companies with late stage mature businesses. So you're kind of just making it an apples-to-apples comparison. So by doing that, let's go through Amazon, maybe even the rough P&L, and describe exactly what you're talking about there. So Amazon has two main segments.

Starting point is 00:41:14 They have the cloud segment, Amazon Web Services, and then they have everything else, most of which is e-commerce-related. So they report Amazon Web Service as a 30% margin, which is a healthy margin. So there's no need to make adjustments there. But they're e-commerce or everything else besides AWS. If you just look at the annual report in 2020, which is when I really got conviction on Amazon, their e-commerce margin was 2%. That's what the gap financials wanted you to believe. Walmart's margin was 6%. So if you believe that Amazon's e-commerce margin was 2%,

Starting point is 00:41:50 then you were basically saying Amazon is a third less profitable than Walmart. Like that's what the financials were forcing you to believe. And if you believe that, then, you know, I don't think you should be in the business. Because it's absurd that a brick-and-water retailer would have three times the profitability of an e-commerce retailer who has no stores and who does all their business online. So I walk through the segments in the book, you know, and I say, well, e-commerce, at least 6%, because that's what Walmart is. So I kind of get into the, what, 9, 10% ranked, I think, for e-commerce. Then I go to physical stores, you know, they own whole foods and subscriptions. And those are both very low-margin businesses.

Starting point is 00:42:31 subscriptions they use as a lost leader. They give me Prime Video and they give you Prime Video just to cement us into the prime retail ecosystem. Like, ooh, I've got Prime Video. What a nice little add on so that they can make money off us in e-commerce. But those have a very low margin. But then there are two very high margin segments, which are really recent segments. There's what they call the third-party seller segment where they're not buying the books

Starting point is 00:43:00 and the electronics and the printers and the Swiffer wet jets and keeping them inventory, Amazon is not. They're using their platform to say to other merchants, hey, roughly five out of every 10 searches online for shopping, come through Amazon.com. Put your products on our website and we'll sell them for you and we'll take a little cut. That's an enormously profitable business because they're not buying the cost of goods. They're not buying the inventory. They're just using their platform as a platform. So that's very asset light. And so the best comparable there is eBay, which is similar. You're just sort of sitting there, you know, letting people transact goods.

Starting point is 00:43:38 And those margins are 25%. So I ascribe a 25% margin to third-party sellers. And then the best one is because 50% of all people come to Amazon to search for goods online, all merchants, consumer product companies, everybody wants to advertise on the website. So their advertising businesses are now running third. $34 billion a year, which is almost assuredly pure profit. But just to be conservative, I put a 50% profit margin on that. So when you add up all those segments, the e-commerce margin is not 2%, which is reported. The e-commerce margin in my estimate is 15%. So it's 7x. So

Starting point is 00:44:18 when I was looking at Amazon, the multiple on a reported gap basis was 90 times. But on an adjusted basis on an earnings power basis. It was 15 times. And so that sounds pretty good. So I bought a lot during the pandemic. I love that. And just a quick note there about your rule of finding things that are under a 20 price to earnings ratio, because that's essentially a 5% yield and we're going to come back to that. But anything under that, it seems like it's pretty strong. So even a 15x multiple is very appealing, I would imagine. Yeah, and I make the point in the book, and it's an important point. You know, financial analysts, it's not a precise exercise. It's not like we're aerospace engineers where we're trying to get to a millimeter or the plane will fall out of the air.

Starting point is 00:45:05 You want to kind of get in the ballpark. Buffett said, you know, I want to be directionally accurate or it's better to be generally right than precisely wrong. So, and you can play with these estimates that I make. You know, I show in the book, I outline all my work and say, well, you know, just tell me that you don't think that the e-commerce margin is 10, it's five or whatever, and play with it. It actually doesn't make that much of a difference. I think it moves the multiple from 15 times to 18 times. So 15 times, 18 times. I mean, that's still below the market multiple for, you know, a way above average business. So you don't want to be too cute about it. You know, you just want to kind of get in the ballpark. Let's take a quick break and hear from today's sponsors.

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Starting point is 00:49:07 All right, back to the show. So sticking with that BMP framework you outlined earlier, we've talked a lot about the business element, right, the B, like to move to the M, the management. And sticking with Amazon, you were talking about how Bezos was maybe the best manager to ever live. It would seem, I think Buffett and Munger would agree with you on that. I'd like for you to provide some frameworks for the audience

Starting point is 00:49:30 of how to actually measure management quality as well. So walk us through the two questions or hurdles you use to determine if a company has great management? Yeah, I mean, the two things I say in the book, Trey, are, you know, do they act like owners? Because they're basically two managers of companies. And this is especially true in publicly traded companies where the rewards of being a manager are very, very high. So the one kind of manager acts like they actually own the business. And I talk in the book about Tom Murphy, this great manager that Buffett knew and trusted, who ran TV stations and then ABC and then for brief time Disney.

Starting point is 00:50:11 But he didn't own a lot of stock, but he was just this old school guy that believed that he was a steward for the shareholders. And he got rich. I mean, look, he got wealthy, but he never got obscenely wealthy. He never saw the company that he was running as a vehicle for his own personal enrichment. He believed that he was running it for the shareholders. And if he ran it for the shareholders, they were. reward him, he would reward them, and everything would work out. Now, the second kind of executive,

Starting point is 00:50:41 which is all too common in publicly traded companies, is the guy who's there or the woman who's there for five or ten years to run the, you know, from age, you know, 55 to 65. And they've got 10 years. And they're basically, they're not playing defense, but they're kind of playing not to lose. Just kind of keep it in the middle of the fair way. Don't do anything stupid. And basically get paid as much as you can. Get the board to give you as much stock comp and perks, you know, airplanes and life insurance and security details and the perks go on and on. And these people do not act like old-time stewards. You know, Carl Icon has this great image of, you know, these guys are like the caretakers of a giant English estate. But instead of taking care of the estate for the owners, they're just, you know,

Starting point is 00:51:29 skimming as much as they can. You know, they're taking the sheep and they're taking the milk and they're taking the barley or whatever. And you want to look for a manager who really acts like an owner. Owning a lot of stock is a good sign, but it's not always the right sign because Murphy didn't own a lot of stock, but he acted like an owner. And some guys or in some women own stock, but they're ignorant of the drivers of value. And so they ruin shareholder value. They want to act like owners, but they don't know how to be. And that's the second characteristics that I talk about in a book. Are they financially savvy? Do they understand the drivers of value? And it's not like you have to be some sort of financial whiz, but you do have to understand a few basic principles.

Starting point is 00:52:09 And the central one is return on capital. So, you know, it's this very simple calculation where you have the assets that you're required to generate the profit and then the profit. So this is what you talked about when I said. Ford has to spend $10 of assets to generate a dollar of profit. So their return on capital is 10. And Coke, if you put in all the bottling plants, which they put off balance sheet, but that's just a trick to try to trick investors to think that they're more asset light than they are. But the rating agencies require to Coke to put all their bottling assets on the balance sheet. So if you look at that, one over six, their return on capital is 17, 16, 17 percent, which is good.

Starting point is 00:52:49 Anything in the teens is good. But Facebook was, what, one over two? 50 percent return on capital. So you want a high return on capital businesses, and you need to understand. I'm going to invest X and I'm going to get Y. And you want to be thinking, you know, almost like there's got to be a cold-bloodedness to your management. Like I quote this guy who runs this great aerospace company called HICO in the book.

Starting point is 00:53:13 He's like, yeah, I happen to be in the aerospace business, but really I'm just in the cash generation business. And the aerospace company that I run happens to be the vehicle. All good managers think that way. They just want to say, I'm investing X and I'm getting Y. What am I getting? What I have to invest? What am I getting? And if it's not a good investment, I'm not going to do it. I'm not going to do it because I feel because it's cool or because I build an empire to myself. I'm going to do it because I'm a cold-blooded manager who knows how to drive value. And that's what you want to look for. Yeah, I actually highlighted that quote in the book about being in the cash flow business. What a great line. And you've actually inspired me to refocus on return on capital because I've kind of shifted my focus. When I'm talking about a quality of management. I shifted over to the interest coverage ratio. And the reason for that is I read Toby Carlyle's book, a good friend of our show here called Deep Value. And he essentially

Starting point is 00:54:08 shows that Joel Greenblatt's magic formula, which of course is the earnings yield and return on capital, actually performs better if you simply just remove the return on capital component, meaning just buying cheap stuff works. And when I talked to Tom Gaynor, he said the best way to look at management is by the level of debt. So when I hear you say, are they financially savvy? I feel like there's a, what you're kind of alluding to maybe there is the amount of their stewardship, right? Because if you're just leveraging up the business, chances are you're probably not, you know, that mindful of the actual long-term effect of that. So with that, I'm curious to know if the debt levels or interest coverage ratios, things like that, way into your thinking when you're

Starting point is 00:54:51 talking about quality of management. Not really, Trey. Tom Gaynor is a good friend of mine and a great investor and I admire him. And I don't know the conversation. But I mean, the fact is that some businesses can afford very high levels of debts and some can't. So the general rule of thumb is the more steady the business, the more debt you can put on it. So consumer products companies, which don't have highs and lows can take a lot of debt. And that actually improves not the return on capital, but it improves the return on equity. which is a related concept. Whereas cyclical businesses, airlines, manufacturing companies, cannot take on a lot of debt. Because you know, you could have a lot of debt, and then the recession comes and you can't pay off your debt. So Tom Murphy, who I write about in the book,

Starting point is 00:55:38 he carried tons of debt. He would lever up to buy a company. Then he would use the cash flow for the TV stations to pay the debt down. Then he'd do it again. If you couldn't buy anything, find anything to buy, he'd buy back his own stock. So he ran with a lot of leverage.

Starting point is 00:55:54 And by the way, insurance companies are levered vehicles. Like, what do you think an insurance contract is? It's a form of debt, right? I'm the insurance company. I sell you a policy. I'm on the hook to you to pay you the claim. So I don't actually think that's a good marker. Really fascinating.

Starting point is 00:56:11 Thank you for that. So a new standard metric that most executives use, especially in tech companies nowadays, is the lifetime value over the cost of capital. And Buffett was even early in this, it would seem, when he was first investing in Geico. Walk us through what Buffett was doing there, the two metrics themselves, and what is actually telling you when you're dividing the lifetime value by the cost of capital? Well, I'm so pleased you picked up on that because it's a very obscure, not very obscure, but relatively obscure concept that not a lot of people get.

Starting point is 00:56:46 But it's extremely important to tech companies. And it goes back to sort of the outdated accounting. rules, Trey, in the sense that Intuit, which is another great company that I own that I talk a lot about in the book we haven't spoken about. But they use lifetime value over customer acquisition costs a lot because when they spend marketing dollars to get new QuickBooks customers or new turbo tax customers, they think of it as an asset. They think of it those expenditures as having more than one year useful life. Because if they can capture a customer, that customer will be with them for multiple years because TurboTax is a very sticky product, right? Once you start doing your taxes

Starting point is 00:57:26 on TurboTax, hard to get off. Once you start running your small business on QuickBooks, hard to get off, hard to rip those guts out of the back office. So they know that if they spend a dollar on customer acquisition, they want to get multiple dollars of revenue over. over the lifetime value of that customer. So it's customer acquisition cost in relation to lifetime value. So into it, like many tech companies, wants to spend a dollar of marketing spend, and they think that they'll get,

Starting point is 00:57:59 they want to, the hurdle rate is $3 of lifetime value of customers. So if I spend a hundred million of marketing turbo tax, I'm hoping that over the lifetime, the customers I acquire from that marketing spend, will spend with me $300 million. dollars. And let's just say that the profit margin on those customers is 20%. So, and that's probably low, but let's just say 20%. So $300 million of revenue at a 20% margin is $60 million of profit. And I spent $100 million to get it. So that's a 60% return on capital, right? 60 million over 100 million.

Starting point is 00:58:37 But that never shows up in the financials because all those marketing dollars were expensed immediately. So this is one hack that tech companies use to say, yeah, the gap's wrong. These are not expenses. These are long-lived assets that we're creating. And so we're going to rejigger the financials to think about it correctly, not correctly the way Gap tells me, but correctly the way business people think. Buffett has done this. He bought Geico. Geico's public company in 1995. He bought it for Berkshire. Geico, the last year they reported financials, made three, uh, $250 million in profit and spent $35 million in marketing. When he bought the whole company and he could control it, he said, to hell with this,

Starting point is 00:59:20 this is such a great product. I'm going to tank my profits in Geico and spend like a drunken sailor on marketing because I know that those marketing spend like Intuit will have a positive lifetime value. So in 1999, he spent $250 million on marketing in Geico. He spent the entire profits of the company four years before in marketing. So does that mean they were, quote, making no money? Well, according to GAAP, yeah, but he knew that that was baloney. And he wrote about it in the annual.

Starting point is 00:59:53 He said, yeah, the profits look like they're down, but the intrinsic value is going up. And this is, you know, what tech companies understand. I mean, tech guys are engineers. They are quants. They are, you know, they measure everything. So if you find a company like Intuit or Amazon where the guys, the management really knows what drives shareholder value, they're going to adjust the financials and run their company according to economic reality rather than Gap financial reporting.

Starting point is 01:00:25 You know, as I said, Bezo should have shut that company down a long time ago if he believed Gap. But he was making all these sort of adjustments like Buffett did with Geico and Intuit's doing with LTV to KAC. and it's interesting. I'm glad you brought up Bezos there because I was just going to say that I imagine that's one of the metrics that kept his composure when, you know, saying the dot-com bubble it went from, you know, went down 94% I think at one point. So you have to be looking at the dashboard and saying, actually the business is improving dramatically and the return on capital is amazing. All right. So we've done the B and the M.

Starting point is 01:00:58 We want to move on now to price the P and the B&P equation. You know, as I mentioned earlier, you're looking for a minimum of a 5% yield. we were talking about the PE of 20, with inflation and interest rates both now rising, I'm just curious, does your playbook change to reflect the new environment we're going into? Well, it's an excellent question, because rising interest rates compress or depress multiples because net present value and all that stuff. But not that I had a crystal ball, but I knew that when I wrote the book, which was kind of at the peak valuations, I knew that valuations would probably come in.

Starting point is 01:01:36 So I feel comfortable still with 20 times. You know, 20 times free cash flow or earnings power is a 5% free cash flow earnings yield. So if I'm getting paid 5% day one and then the business is going to grow, so year two, I make 6% and year 3 I make 8% and year 4 I make 10%. I think 5% is a fine place to start. I'm okay with it. I also had another curiosity. You mentioned Roku in your book and their price recently sort of. to $480 and is now back down in the 80s as of today. Is this an example of when we should,

Starting point is 01:02:13 as value investors, back up the truck and load up? I wish I'd learned about Roku earlier because Roku has very interesting business dynamics. I mean, they've basically interposed themselves between the streaming services, Netflix and Amazon, and the viewers. And they said, we're our connection and we're a toll bridge because we have the biggest share of streaming devices. We're going to charge you to go over our toll road to get to the consumers. Now, I haven't studied it intensively, so I don't know the answer about Roku backing up the truck, but I know the question, which is the same question you always want to ask yourself, is their business sustainable?

Starting point is 01:02:55 Are they going to be able to withstand the competition that is definitely coming for them, just like people came for Google to try to steal their riches because there's a lot of money there. Or they're just going to go the way of GoPro. GoPro is a great stock. People loved it. And then competition came along and how differentiated is a selfie stick, really. So you look at GoPro's stock price, which I put in the book, it's a disaster. So I don't know the answer to Roku tray, but I know the question, which is, do they have a moat?

Starting point is 01:03:26 And that's what you should be asking yourself. And by the way, if you can't figure out there, Whether they have a moat, they don't have a moat. Great point. There's a sentence in your book that stood out to me where you essentially claim that the stock market is not like Emerald City, where there's this Wizard of Oz hiding behind a curtain, pulling strings. And we have had lots of differing opinions on this show about that kind of thing.

Starting point is 01:03:50 I'm more in the camp of thinking that the market's performance is strongly influenced by the Fed's actions or even the anticipation of them. Is this sentence essentially writing off macro in a similar way, similar, I guess, to how Buffett would advise? Well, I don't think Buffett writes off macro and neither do I. I mean, he says, and he's right, that interest rates are the single most important determinant of stock valuation. So in that sense, it's rational that the market decline as the Fed is, you know, now raising interest rates. But on the other hand, he's right and Peter Lynch is right. that, you know, it's not a stock market.

Starting point is 01:04:29 It's not an abstract thing. It's a market of stocks. You know, and I encourage you and your listeners to think about it like a grocery store. You just walk in there and you see what's on sale. You know, you see what's good merchandise on sale. You walk into a grocery store, you know a good deal, right? You know when the avocados look good and are well-priced, and you know when the raspberries look crappy.

Starting point is 01:04:55 Like, it's the same. It's the same. So, you know, markets are going to do what they're going to do, as we said in the beginning. But in the end, superior businesses prevail. I mean, look at Apple from 2010 to 2020. The stock market did nothing, right? It was the lost decade. The beginning of the decade, you had the dot-com bus. At the end of the decade, you had the financial crisis. The S&P was flat. But Apple was up by multiples. Why? Because they had a good business. You know, and I'm not just sort of being cavalier or flippant. It really kind of is that simple. And it really does pay, in my experience and in my opinion, to go back to first principles and think about it like a 12-year-old. Another reason I ask is because Jeremy Grantham once said on this show that bear markets

Starting point is 01:05:43 start with these termites and that the termites eat away at the tech companies first. And we actually saw this exact thing with this recent downturn. So it makes me kind of wonder, do you think the rise of tech over the last decade was highly correlated or caused by just the amount of cheap credit that we had available to us? I think the answer to that is pretty obviously no. I mean, anyone can come up with a good sound bite about termites and this and that. You know, good investments don't start with sound bites. They start with analysis. So the reason tech companies have appreciated so much, Trey, has zero to do with interest rates, has zero to do with macroeconomic factors. It has to do with

Starting point is 01:06:26 two things. One, in the last 10 or 15 years, technology is hit in critical mass to where, you know, broadband connectivity was robust and computing power became affordable so that everyone could afford a smartphone. So that's number one. Technology just hit critical mass. And number two, a certain select group of companies figured out a way to make moated businesses out of these tech trends, including Apple, including Google, including Google, including including Amazon, including Airbnb, including Adobe, you know, just go down the list. You probably know ones that I don't know. But this has nothing to do with interest rates or easy credit. This has to do with harnessing technological change and then making an incredible consumer product

Starting point is 01:07:14 that people love and trust and will never leave. I really appreciate that perspective. And I really enjoyed this book. It's going to be, I think, my new most recommended book. It's called Where the Money is. Adam, before I let you go, where can our audience learn more about you and the book and any services or resources you want to share? Well, Trey, first of all, thank you for the kind words. I know you read a lot of investment books. So that's high praise from you, and I really appreciate it and in touch by it. You know, in terms of me, even though I understand social media, I really don't like being on it. So you can go to Amazon and buy a copy of the book, course, or if you want to support your local

Starting point is 01:07:55 bookseller against Darth Vader to go to the local bookseller. Simon & Schuster has a webpage on my book with the reviews from Bill Ackman and Joel Greenblatt and also links to local booksellers. And then the one service that I use, the one social media service

Starting point is 01:08:11 I use because I like it, it's pretty low key, is LinkedIn. So if people want to hit me up on LinkedIn, I've had several really nice chats with readers and I'm happy to connect with people who want to learn more about how to invest in the digital age. Because it's an important question.

Starting point is 01:08:26 I think in many ways it's the important question. We've got the century-old value discipline, and then we've got this incredible technology that's come from nowhere in the last 10 or 15 years. And how do you put them together? How do you synthesize the two? That's what I'm trying to do. That's what the book's about.

Starting point is 01:08:43 It's a very powerful concept and very powerful tools to use moving forward. Adam, really enjoyed it. Thank you so much again. Congrats on the book. I did too, Trey. Thanks to us so much. All right, everybody, that's all we had for you this week.

Starting point is 01:08:56 If you're loving the show, don't forget to follow us on your favorite podcast app. And if you feel like leaving a review, it really helps the show. You can also reach out to me directly on Twitter at Trey Lockerbie. And I highly encourage you to check out all of the resources we have for you at the Investorspodcast.com or simply Google TIP finance. And with that, we'll see you again next time. Thank you for listening to TIP. Make sure to subscribe to Millennial Investing by

Starting point is 01:09:22 The Investors Podcast Network and learn how to achieve financial independence. To access our show notes, transcripts or courses, go to theinvestorspodcast.com. This show is for entertainment purposes only. Before making any decision consult a professional, this show is copyrighted by the Investors Podcast Network. Written permission must be granted before syndication or rebroadcasting.

We Study Billionaires - The Investor’s Podcast Network - TIP465: Value Investing in the Digital Age w/ Adam Seessel

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