We Study Billionaires - The Investor’s Podcast Network - TIP728: Mastermind Q2, 2025: Microsoft, Block, Devon Energy, Adyen

Episode Date: June 8, 2025

In today's episode, Stig Brodersen is talking stocks with Tobias Carlisle and Hari Ramachandra. Stig’s pick is Microsoft, the world’s biggest market cap company for good reason. Tobias is pitching Devon Energy, an oil and gas producer with a big upside if you’re right about the timing. Hari’s stocks of choice are Adyen and Block, two fast-growing companies with stronger moats that meet the eye. IN THIS EPISODE YOU’LL LEARN: 00:00 - Intro 01:51 - Why Hari is bullish on Block and Adyen (Ticker on NYSE: XYZ and on Euronext: ADYEN). 12:48 - The bear case for Block and Adyen, including valuation and disruption. 24:22 - Stig’s bull case is for Microsoft (Ticker on NASDAQ: MSFT). 44:55 - The bear case for Microsoft, including the rich valuation. 56:56 - Why Toby is bullish on Devon Energy (Ticker on NYSE: DVN). 01:05:31 - The bear case of Devon Energy, including the debt level and share issuance. 01:27:06 - What the TIP Mastermind Community is and how we’re forming meaningful relationships. Disclaimer: Slight discrepancies in the timestamps may occur due to podcast platform differences. BOOKS AND RESOURCES Join Clay and a select group of passionate value investors for a retreat in Big Sky, Montana. Learn more ⁠⁠⁠here⁠⁠⁠. Join the exclusive ⁠⁠⁠TIP Mastermind Community⁠⁠⁠ to engage in meaningful stock investing discussions with Stig, Clay, Kyle, and the other community members. Stig Brodersen’s Portfolio and Track record.  Listen to Mastermind Discussion Q1, 2025 or watch the video.   Listen to Mastermind Discussion Q4, 2024 or watch the video.   Listen to Mastermind Discussion Q3, 2024 or watch the video. Listen to Mastermind Discussion Q2, 2024 or watch the video. Tune in to the Mastermind Discussion Q1, 2024 or watch the video. Listen to Mastermind Discussion Q4, 2023 or watch the video. Tune in to the Mastermind Discussion Q3, 2023 or watch the video. Listen to Mastermind Discussion Q2, 2023 or watch the video. Bill Gates’ autobiography, Source Code – read reviews of this book. Stig and Preston book review of Paul Allen’s book, Idea Man.  Tobias Carlisle's podcast, The Acquirers Podcast. Tobias Carlisle's ETF, ZIG. Tobias Carlisle's ETF, Deep. Tobias Carlisle's book, The Acquirer's Multiple – read reviews of this book. Tobias Carlisle's Acquirer's Multiple stock screener: AcquirersMultiple.com Tweet directly to Tobias Carlisle: @Greenbackd. Tweet directly to Hari Ramachandra: @harirama. Check out all the books mentioned and discussed in our podcast episodes ⁠⁠⁠here⁠⁠⁠. Enjoy ad-free episodes when you subscribe to our ⁠⁠⁠Premium Feed⁠⁠⁠. NEW TO THE SHOW? Get smarter about valuing businesses in just a few minutes each week through our newsletter, ⁠⁠⁠The Intrinsic Value Newsletter⁠⁠⁠. Check out our ⁠⁠⁠We Study Billionaires Starter Packs⁠⁠⁠. Follow our official social media accounts: ⁠⁠⁠X (Twitter)⁠⁠⁠ | ⁠⁠⁠LinkedIn⁠⁠⁠ | ⁠⁠⁠Instagram⁠⁠⁠ | ⁠⁠⁠Facebook⁠⁠⁠ | ⁠⁠⁠TikTok⁠⁠⁠. Browse through all our episodes (complete with transcripts) ⁠⁠⁠here⁠⁠⁠. Try our tool for picking stock winners and managing our portfolios: ⁠⁠⁠TIP Finance Tool⁠⁠⁠. Enjoy exclusive perks from our ⁠⁠⁠favorite Apps and Services⁠⁠⁠. Learn how to better start, manage, and grow your business with the ⁠⁠⁠best business podcasts⁠⁠⁠. SPONSORS Support our free podcast by supporting our ⁠⁠⁠sponsors⁠⁠⁠: SimpleMining⁠⁠ ⁠⁠Hardblock⁠⁠ ⁠⁠AnchorWatch⁠⁠ ⁠⁠Unchained⁠⁠ ⁠⁠Human Rights Foundation⁠⁠ ⁠⁠Onramp⁠⁠ ⁠⁠Fundrise⁠⁠ ⁠⁠Vanta⁠⁠ ⁠⁠Netsuite⁠⁠ ⁠⁠Shopify HELP US OUT! Help us reach new listeners by leaving us a ⁠⁠⁠rating and review⁠⁠⁠ on ⁠⁠⁠Spotify⁠⁠⁠! It takes less than 30 seconds, and really helps our show grow, which allows us to bring on even better guests for you all! Thank you – we really appreciate it! Support our show by becoming a premium member! https://premium.theinvestorspodcast.com/ Support our show by becoming a premium member! ⁠https://theinvestorspodcastnetwork.supportingcast.fm⁠ Learn more about your ad choices. Visit megaphone.fm/adchoices Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm

You're listening to TIP. I always look forward to a quarterly mastermind episodes with my friends, Tobias Carlisle and Hira Madhandra. If you're not familiar with the format, it's when we once a quarter pizza stuck to the group and discuss both the bull in the bare cases. We cover a lot of ground in this episode. My pick is Microsoft, and at the time of the recording, it's the biggest market cap company in the world. And we discuss if we completely miss the boat, or perhaps there's more to the story than meets the eye. Tobias's pick is a true value-advesting stock, trading at only seven times earnings. They want energy.

And if you're right about the timing, you're looking at a huge upside. Hari is pitching not only one stock, but two in this episode, and we'll shortly jump right into it. But before we do, I want to remind you to stick around for the second part of this episode, when my co-host Clayfinger and I discuss our upcoming TIP summit. Our summit this year is an in-person event in Big Sky, Montana. Only 30 spots available. The premise is to network with like-minded value investors, share ideas, create meaningful relationships, and, of course, enjoy delicious food in a wonderful setting.

Since 2014 and through more than 180 million downloads, we've studied the financial markets and read the books that influence self-made billionaires the most. We keep you informed and prepared for the unexpected. Now for your host, Steve Broderson. Welcome to The Investors podcast. I'm your host, Stig Bordersson, and today, as always, I'm here with Harry and Toby. How are you today, Jans? Hey, Sting and Toby.

Good to see you more, as usual. I'm doing good. Good to see you, Harry. Good to be back. So, as always, we're doing straws. Actually, I usually just put Toby and Harry on the spot, and then there was an awkward silence before we hit record. And then someone says, okay, I'll go first. So today, Harry was the one who budged.

So, Harry, you'll go first with not just one, but two picks. Yeah, I thought I'll give one more bonus. I mean, to be honest, I wasn't sure which one to pick. So in a way, I'm actually coming to you, guys, the mastermind here, to help me get some perspective just to give some background. I was following all the news, all the geopolitical tensions. A lot of it around is trade, the movement of capital. So I've been following a couple of fintech companies for some time now.

And there are two that stands out. One is in euro and the other one is in US. I'm talking about Arian and Blocks, formerly known as Square. And they both are very interesting because the approach they have taken is totally different. So if you look at Adnion, it's headquartered in Netherlands. It's a B2B payment platform. It focuses mainly on big global enterprises like Uber, Spotify, booking.com, McDonald's, you name it, like all the big players are their customers.

And they have a vertically integrated stack. Most of the infrastructure is in-house. they don't like have third party vendors integrated it with their system and they have been able to control cost because of that. And also more importantly, they have a lot more control on that latency, security and all of this from an investment perspective is reflected in their margins. Now, Adir is growing in a very healthy way, like it's almost like 23% year-year-year-over-year growth in the last five years, currently at $2.3 billion in revenue, while the EBITR margins are above 50%. So this is like one of the highest margins you would see in any industry and not just Pintech. And the main thing is that, The switching costs are really high in this industry. Like, you know, companies don't really switch their payment systems because there's so much people integrated into their workflows.

It's critical for their business. And Aidian has presence over 180 countries and supports more than 250 payment methods. So there is no other company that has that level of geographic coverage that these global enterprise need. And the switching cost, you can see the strength of the switching cost, their competitive advantage in the fact that 80% of their growth comes from existing clients. As existing clients expand, they roll out more features, cross-selling, all that helps add in. And that's one of the reason for the stability and consistency in their revenue and their margins. and they're very good stores of their capital. Like, their return on invested capital is over 54%.

They're able to generate more than $1.7 billion in pre-cash flow with around 87% of convergence. And they have a lot of cash on the balance sheet as well, like $10.35 billion in cash, while their debt is only $236 million. Essentially, they are debtful. So it's a very safe fortress of a balance sheet. So, highly capital efficient and compounding consistently, both their earnings and their revenue

at around 20, 25, 30, 30 percent year over year, and they have been doing it highly consistently. And the next five to 10 years, with the digital digitization. of commerce expanding real-time payments becoming a norm this model of integration between point-of-sale brick and mortar and online commerce and focusing on big enterprises doble enterprises will definitely pour well for ad in of course everybody knows about it so they're richly valued i think their p is quite high but the price to say and six self is like 23 So that's what gave me a pause off.

Then I was looking at, okay, then growing at 45, 30, 35% annually for the next five years, with consistent track record, wouldn't this be justified for somebody who's looking for a same consistent compounder? So that's one. Now, some of the risk of course is the decline of globalization, country selecting barriers, all that can hit them hard because they focus a lot on these global enterprises transacting across multiple countries so that's definitely a risk for them now contrast this with block if that was more like a stable value play this one is more like a venture bet because

they are into everythings like of course this is one of the company's job jan dot see the founder of twitter former founder of quitter founded this company In fact, you were CEO of both blog and Twitter for a while. They're like 10 times in terms of revenue compared to ADN, like $24 billion in revenue. But they are into multiple areas. They mainly focus on small and medium businesses. They have consumer vertical. So they have a cash app that's quite popular.

They're also into afterpay and they're also in a big time into Bitcoin. In fact, like, their 24 billion in revenue is not really real in the sense that there's a lot of Bitcoin pass through revenue there. So if you actually look at the revenue, that's more closer to $6 to $8 billion. So that's where we've got to be careful here. But they are also growing at like 30, 40% annually in terms of their revenue. But it's much more volatile. Like any, it's the more cyclical in that sense. like in both of the absent flows of Bitcoin.

So it's, you've got to have a strong stomach for the volatility that this stocks brings in. And also they're investing a lot and we don't know how efficiently they're investing. So that's the other thing because they're dabbling in multiple places. So it's almost like a venture bet. So their EBIDA margins are like 15% or 30% or less than 15% to 20%. So in terms of, you know, competitive advantage or more. Of course, there is network effect with cash app and small businesses using their square hardware and app.

But I think in terms of fundamentals, the way I look at it is with the margin, low margin, return on investment capital of 952 percent, free cash flow of 1.2 billion, they do have a good cash position too, like 12.7 billion, with debt of 5 billion. But I think the sterlet is mainly the ecosystem. But I am looking at the auctionality because that price at just 1.5 sales compared to 23 for ADM and correct reasons because there is a lot of investment that they are making which we don't know how they will pan out. So there is uncertainty, there is cyclicality, volatility. But there is also a tremendous upside if they succeed in some of the ventures that they're looking into. And their prize actually accounts for all this uncertainty.

So that's a good thing. Whereas in case of Adian, it's price to perfection. So if Bitcoin becomes, and if Kristen was here, he would have supported this. If Bitcoin becomes much more accept them across the world. and becomes mainstream, they have a tailwind there from the Bitcoin adoption as well. But I think the way I look at it is there is risks there because some of they're like, you know, they're acquiring, they're investing, they're like a venture. So we don't know how they will pan out.

So the way I look at it is ADN is a 4 plus minimal debt, tons of cash, industry, best returns. whereas Block is leverage for growth, but enough liquidity to ride all the volatility. So it's almost like, you know, Adion is like Coca-Cola if like in a Buffett when he invested like sturdy, good growth, but you are paying for that. Whereas Block is more like American Express when Buffett invested in Netflix. Like, you know, it's a lot messier but has a massive upside. So those are the two picks. In fact, like, I don't know which one is better.

So I'm actually curious to know your thoughts on that. I guess the question is always the valuation for these things. I think it's been more expensive than this. So it's off quite a bit from its peak in 22 or 21 when we had all that silliness going on. So they've probably, they've worked off some of that overvaluation, but 22 times sales, there's not a lot of, like a lot has to go right for you to get paid, which is not to say that a lot's not going to go right. What's the competitive landscape like for these guys, given the valuation that you're sort of, you're paying for these things. Is it a, are they going to win?

Yeah, actually, that's the point where we like, I was, the way I was trying to justify the 23 times sales valuation is, if they're growing like 30. 30 plus percent year over year in the next five years, it'll be around eight times it. So there's still more quite expensive. Even after growing 20, 30 percent a year for the next three to five years. So that's the reason I found it. It's a solid business, but that is priced into the stock. It's really difficult for me to value these type of companies.

I think it's all there for us to see how great a company, that it is. You briefly mentioned Bitcoin there. I probably, not that we talk too much about here on the show, we know, we have Preston's show for anyone who's interested in Bitcoin, but just to your point, perhaps it would just be a pure play just to hold the coins yourself. But whenever I'm looking at something like this, and I'm trying to figure out, okay, so what is the competitive landscape who has a competitive advantage, which I'm the first to say, I don't necessarily think I would do a good job of. So I'm looking at how do they behave? And what do I mean by that?

So let's compare this to Visa and MasterCard, which I should say for the record. They don't compete with. They're sort of like more on top of their rails if you want, for example, for Eddie. And so that is a very interesting almost duopoly. You can include Union Pay if you want to, but they don't compete in the same market. But for your payments outside of China, you know, you more or less, you have Visa, you have MasterCard, and then there are some very specific countries like, you know, for example, Brazil where they're doing the own thing.

But you have those two. and they don't really compete with each other on price, which is probably not what you want to see as a customer, but is 100% what you want to see if you're an investor. And so whenever you have like an oligopoly type of competition, which is just a fancy way of saying they're only a few players, I'm sort of like trying to figure out, especially whenever you have high margins, how rational they are, rational from a shareholder perspective. And one of the things that I can't help but notice is that they're going head to head with Stripe. And Stripe being U.S.-based, traditionally had a head of focused on the U.S. and at the end, focus on Europe being based

in the Netherlands. So they're starting more and more to compete with each other. And one of the problems is that they're to some extent trying to compete on price, which is generally not what you want to see. Whenever you see like a tech company and it's trading at 23 times sales, like the value investor in us or the cheap skate and us are like, no, no, no, that's just way too expensive. But then there are like different things you sort of like have to break down. One of them is like how fast can this grow? And like we've seen multiple times, you know, there's a lot of operating leverage. In other words, like every dollar that comes in, more or less drops to the bottom line. So you have that and then you have the opportunity

for explosive growth. But you also need to be able to fend off that competitive pressure. because all of a sudden, like, if you have 80% margins, you're like, oh, my God, this is amazing. Perhaps you can justify 23 times earnings. But then if you start competing on price, like all of a sudden those 80% margins might go down to like 40% or 20%. So, so like, in the equation completely changes. And so I don't really know how to best value this. It's a long way of saying, I don't know.

But, you know, it's also like whenever you had the big tech companies back in the day, And I don't even know whenever we should make the cutoff point, whenever we say back in the day, let's say a decade ago or whatnot, like the big tech companies to a lot to extent were competing in different verticals. And then they became so big that to continue to grow the amazing pace that they are, they had to sort of like start to compete with each other to some extent and some of the same business lines. And you sort of like, and I know you pits both doxies, but you sort of like see some of that happening with Block 2, where, you know, Block has. traditional been, you know, smaller companies, pluck and play, and you didn't need any kind of developers, anything like that. It just worked out at gates. And they're going more and more upmarket in sense of like your enterprise size, but at the end sort of like doing the other way and where you're like, oh, okay, so what does it mean? And other room for them. And of course, if you look at, you know, a company like Amazon, who started whenever they started cloud and, you know, And then you have Microsoft coming in and Google.

So you can say that there's room enough for them, but it also sort of like depends on how the actors engage with each other. So I don't really know. It's such a, it's a tough one. And I think you can probably come up with different kind of arguments, like the whole fraud protection and why that's important. And there's sort of like a first move advantage and you build up more and more data and that data has been harvested and it's being very useful.

But I don't know, let me throw back over to YouTube or you, Harry. Harry, how do you feel about the, I know that the argument for MasterCard and for Visa historically has been that they have their own rails, they have their own system, and it's just hard to replicate that. You've got to build that out globally. It's not going to be easy to do. I was in Shanghai a month ago for a week, and Ali Pay and the one that I used, which is just escaping me now, the other one. There are two payment systems that they have there. And basically,

every vendor, every taxi driver, everybody has a little QR code, basically. And that's what you use to pay. So they don't need a rail system because they've built it over the internet. And so it's like a sticker. And everybody has one of these things. And you can give anybody money. and the providers for the vendors are the same as the provider for the customer. And so they don't even need to charge very much money. They charge basis points to do this stuff. And so it's a totally different system to the one that we're used to. And I get that it's a little bit of a closed garden.

So it's probably not the final solution either. But I worry a little bit about it. And I think that payments is a difficult problem. Clearly there's lots of different systems. You're in lots of different countries. It's a hard problem to solve. And so anybody who solves is going to do very well for a long period of time. But it feels to me like there's the system is a little bit of flux.

So maybe someone like Adyan, maybe these guys do quite well if the flux, if the system changes and MasterCard and Visa don't do so well. But I just, I feel like this whole payment system is changing. And I don't know how, I don't know what it looks like on the other side. It's not necessarily a criticism of Adiyn. And I didn't maybe the ones who benefit from a system but is in flux because they've got so many different ways of processing payment. But have you thought through that? Like, what do you think about payments globally, payments generally?

Like, what do they deal with this sort of, I think what is going to be a revolution in payments over the next five to 10 years? Actually, that's a very good point, Tobin. And that's for those are a pretty big risk. Like, these payment systems are more like public good, the way China or India, are positioning it. In India they call it the India stack. In China, I think Union K was another one. Basically, the way they are approaching it is

they are going to make the rails a public good. So nobody can monopolize it. So that's one of the challenges even Misa and MasterCard has in India because I'm not that familiar with the Chinese payment system. But in India, at least, the UPI, as they call it, is a public infrastructure. It serves around, like, you know, billions of transactions per day.

But then there is Google Pay or any other payment app can sit on top of it. That disenfranchises all these rails makers, whether it's Misa, Masuka, or Aden, or Block. And definitely, that is a risk. if these payment system can start talking with each other. Right now, they're all walled gardens. That's where Adian brings in value because now they smoothen the payment system across multiple geographies for these businesses.

And that's where if they're rains are. Now, in future, if we have a situation where there is an open protocol that these world gardens can talk and they can do payments internally, but they can talk with each other. That's where adding and block, business model. I think it's a very good point you brought. That's a big risk. They're basically, they're out of business.

That's an part of time in a way. Even Visa and MasterCard, to a great extent, these payment system pose a big threat impact. Visa and MasterCard, we love it heavily in India, I heard, not to open up UPI the way they did because that would impact their business. But I think in India they anywhere went ahead and did that. And I can see when I visit India now, like nobody uses cash. Everybody has a phone, everybody has a QR code, including like street vendors and even beggars.

So they have a QR code, not cash. And that's a big risk for top. And not just for ADN and blog, but also for Visa and MasterCard. If everybody is using cash apps, I think Google pay, therefore Google will benefit. of it, I guess. So that's something that we need to definitely keep in mind that if these walled gardens can start talking to each other, the business model of Adi and N Block are definitely under threat at the part. But it's also possible they're the ones that facilitate their conversation, so they may be the beneficiaries of it. Yeah, yeah, but that's kind of a life. So this is where,

like, you know, it's very hard to figure out how the next five years will shave. And that's where Adian, as you say, like, you know, price to perfection is the risk because it's not as certain as we think it is. Whereas block, I think, is not priced for certainty. It's price for uncertainty. And that's where like I'm slightly, if at all, I'm picking, leaning towards block because it has optionality and it is price for uncertainty because they have the consumer cash app. They're not just dependent on only the payment systems. They have a consumer cash app.

They can easily participate in this QR code, UPI kind of a thing, where cash app is like Google Pay, basically. They can participate in Bitcoin. They can participate in the rails for small business, the payment rails. So they have their tentacles in multiple things, whichever works, they can kind of adapt and grow. and their stock might not be priced for that auctionality. Rather, I think the investors are focusing on the ROIC

and also the low margins and the recent disappointments because I think they're trying a lot of things. I think the way they are approaching is almost like how Amazon used to be in its earlier days where they're putting a lot of money back into the business rather than focusing on margin. and they're throwing a lot on the wall and see what sticks. So that's the reason that RIC is also low,

but it might pay it. It's almost like a venture better at that part of time. But Toby, that was a good point. That's a big risk actually. And it might not be just risk for these two companies. Many FinTech companies, including big ones like Visa and MasterCard, might go through destruction. Let's take a quick break and hear from today's sponsors.

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at Shopify.com slash WSB. Go to Shopify.com slash WSB. That's Shopify.com slash WSB. All right. Back to the show. All right. Well, thank you, Harry, for bringing those two companies to the group.

I kind of feel like my pick here is a little boring. I don't think you can call it a hidden gym whenever it's like a $3 trillion market cap. It's not really in the gem territory, is it? Well, it's Microsoft. StockTger MSFT. At the time recording, Microsoft is the public company with the highest market cap in the world.

So are we late to the party? Perhaps we are. I've never invested in Microsoft and yet I feel like it's been hiding in plain sight. I don't remember ever using a computer and not use of Microsoft products. And I've never looked at it as an investment before, which it always seemed to be such a big company

that was just like, you're too late to the party. So I forced myself this time to take a closer look at it. I want to share that with you guys. And typically, and whenever we're presenting a stock, we talk a bit about the history. I don't know. Like, I kind of feel like the history of Microsoft has just been, you know, told so many times.

I don't want to spend too much time on that. But it was founded in 1975, and there was this wonderful story of how Bill Gates and Paul Allen, how they set up shop in Albuquerque, in New Mexico. And the reason why was because there was where the only customer was, by the way. And there was like all of these, you know, myths now. I don't think it was a myth, though. I think it was quite factual that Bill Gates couldn't, you know, whenever he took out clients, he couldn't order alcohol because he wasn't old enough.

Whenever he were visiting clients, whenever they had more than one client, actually had to go to different states. He couldn't rent a car because he wasn't old enough. So anyways, Preston and I actually covered a Paul Allen's wonderful book, Idea Man, back in 2016. I'll make sure to link to that. And then I want to recommend Bill Gates's new book source code. I mean, amazing title. It's the first of three books. And the first book sort of like it talks about his childhood and then the very, very early ending of Microsoft. So anyways, I'm going to highly recommend that. But talking about Microsoft, the easiest just to break it into three segments. And of course, with a massive company like that, it's almost like too simplistic, but here we go.

So the first one is called productivity and business processes. That is 37% of operating income. Think Office 365, LinkedIn, Dynamics. Again, a lot more, but just for simplicity. Then they have the next one called Intelligent Cloud. You can think about Asire here, which I'm pretty sure I mispronounce. And I've checked out multiple YouTube videos and they all say different things. And then the last one is called More Personal Computing, 18%. I think Windows, gaming, search, news advertising. So that is an oversimplification, I should say, but they sort of like to give you an idea of

where we are. And if we talk about competitive advantage and the landscape, so it probably doesn't surprise anyone whenever I say that switching costs are just a massive mode around the business. And I've been using Microsoft Office my entire life. I have no idea if anyone makes better spreadsheets than Microsoft Excel. I don't really care if they do, perhaps they do. But I'd be using it for so long and I kind of feel probably just because I'm lazy that if someone comes up with a better way of creating a spreadsheet, Microsoft does what Microsoft have been doing for such a long time. They're going to come into the game a few months later and then implement it and then they have a platform advantage there. So I guess that's the way to illustrate the switching cost. I actually tried for the longest time.

So back in the day, it used to be so you would pay for like a license. So you have Microsoft Office, whatever. And then they changed it because they're very smart at business. So they changed it to the whole Office 365. And I tried fighting that for the longest time because I really didn't want to have any kind of subscription service. But it's just like, at least me, I just lost. At some point in time, you're like, okay, I have to convert to this. And I don't want to pay for it every single month.

But, you know, otherwise you can't really use it. It's the way it is. And there is a price for everything, of course. but it's just one of those past of least resistant type of thing. It's like I typed up here by notes. Fighting Microsoft is like fighting the Fed. Don't do it. I don't know.

It's a bit of a nerdy joke here. But I kind of feel like talking about the switching cost. I know that I'm going to come up with a bit of an ironic example because here on TIP, we actually use Google Cloud. And I should also say full disclosure. I'm long alphabet. And so you might be thinking, why do you want to tell you? talk about Google Cloud now that we should be talking about Microsoft Cloud, like what gives?

So I want to talk a bit about the decision process that we had, which wasn't that sophisticated to be completely frank, or at least not at my end. So we moved to the cloud in 2019, and the way it happened was that I spoke with our CEO who happened to have a degree in computer science, so I kind of thought she would probably know which cloud to choose from. And I don't speak IT language. I call it IT language. Already, I'm like, you can tell I'm a rookie. So, so what happens whenever I speak with an IT person is that I'm going to ask a question such as, which cloud should we move to? And then in this case, she said something for a really long time that I didn't understand. And that's simply the time whenever I would smile and not for a long time.

And then at the end, I would ask the question, so what do you recommend? And then if it's not too expensive, I'm going just to pay for whatever she would recommend because I don't really understand how it works. And so obviously, that's a very, very bad way of doing business decisions. But I kind of like feel like, I think this story is telling not just of my own ignorance, but of how a lot of decisions are being made where I don't know what it would require for us to move away from Google Cloud. It is certainly an expense, but it's not a major expense that we have. And as long as everything works, and keep in mind, like we're, we're like, we're like 20 people working full time on TAP. So the entire team has been trained on Google Cloud.

If Google came in and hiked the prices with 40%, I don't think they would care. But if you call them and they listen to this podcast like, oh, this sucker, let's hike the price of like 40% for TAPE, I would not change anything because I would have to train the entire team and myself. An expense that percentage wise would go up, but doesn't really make a big difference to us. And I just don't want to do that. And so let's go back. Let's talk about Microsoft here as a stock pick. What I find interesting is that if you look at the three big players in the cloud business, MSR, Microsoft and Google, to some extent, the market share has been set there by historical reasons of who entered the market and when they did. And there has certainly been movements in the

market share of the three big ones, but it's not as dramatic as you might be thinking in something like cloud. So I think I wanted to to talk a bit more about some of the risks, because I made it sound like, oh, my God, like, this is amazing. It's so sticky. How is that not going to be perfect? Well, now that we're talking about Microsoft, there's this famous discussion that Bill Gates had with China Munger, and Munger talks about how, or actually, Gates talks about how it's difficult to do something different. He was specifically talking about Microsoft here, but he was talking about the innovator's dilemma. You've done something for a long time, and you're supposed to

to disrupt yourself. And it's just really, real difficult to start disrupting yourself. That's just not the way that we're wired. And of course, all businesses eventually get disrupted, even mighty Microsoft. They miss the boat on smartphones to Apple, search to Google, but then at least to some extent, whenever you have the networking effects that Microsoft have, you have a chance to catch up. And whenever you have a company like Microsoft that's in tech, yes, but it's 50 years old, I do think

that there is an element of the Lindy effect, meaning something that's been a company that's been there for a long time, it has a bigger chance of a higher probability of staying there for a long time. And I think that's very much the case for Microsoft where it's not just entrenched in tech, it's entrenched in just the way we live our lives. And I do think that there's a certain risk in terms of valuation, opportunity cost. I'll get to that later. But I probably would say here at this point in time, you know, famously Microsoft that seems to be, you know, making new highs, you know, forever the past, I don't know how many years. They actually had close to 17 years before they made a new all-time high from 1999 until 2016. I had to look it up

multiple times. Ironically, I looked it up on chat dbt very much on Microsoft indirect product. And it's like, is it really true? It took almost 17 years to make a new all-time high. Yes, because whenever you have various threats multiples and, you know, the market is sort of like to negative on the sentiment, that is actually how long it's going to take. But anyways, I actually want to throw it over to Hari, and I see some risk out there. I don't think necessarily in the near future, but again, that's why I want to ask you, Harry. You know a lot more about this than I do. I need to figure out, because cloud is such a big part of Microsoft's profits, how do you look at their competitive position? I don't think I have the capability

to say, oh, this is better than Amazon's cloud, for example. And how much is AI a tailwind? I think a lot of people talk about making AI your tailwind. But at the other hand, there's also a lot of headwind from them spending so much money on all those data centers. And we haven't really seen the profits from that yet compared to the level of investment. So I don't really know what my exact question were there, Harry, but I want to throw those thoughts over to you. No, very interesting cake. And also a bold one because it's such a big company now that it's bigger than many countries in terms of this. Comparing to GDP, I think it's bigger than Canada, bigger than Russia, bigger than many other countries actually.

So in terms of the way I look at it is Microsoft is not in the negative way, but in a positive way, the IBM of today, because there was a famous saying in the industry that nobody got fired for buying IBM products. That means like a lot of these IT managers and CIOs who are making the decision, I think Microsoft is a proven player, they are full stack, so they have established themselves. And I think under Satya's leadership, as you said, like, you know, they languish for a long time because they couldn't adapt to the change in the industry that was happening. Especially with mobile, with cloud, they were laid to both parties. They missed one, which is mobile completely.

Cloud, I think miraculously, they came in late, but they are now firmly the second player. Last I saw EW is still the leading player with 30% plus market share, closely followed by Azure, but I don't know like, 20, 22% market share. But now there is another disruption coming, which is AI. And we will have to see how they navigate this cycle. And that's the uncertainty.

Because I feel right now it's not clear who will win, who will lose, who will be disrupted, whose business model will be impacted. That part is not very clear. Of course, they have partnership with Open AI. They have products in AI like, co-pilot, but none of them have proven themselves in the market. So that is the uncertainty. It doesn't mean to say negative, but at the same time, it's for the price that they're selling it, it's baked in that they're going to navigate it successfully. So if we have enough confidence

that they're going to be successful in navigating this, then I think maybe it's worth paying this price. But what I'm thinking is, what will be the returns for you as an investor script like when you invest in this right now they're selling at 35 p i think one of the highest in their history as well uh in terms of their valuation so do we have more rule for multiple expansion they're growing it around 19 or 20 percent in terms of their EPS growth revenue like 14 12 14 15 15 15 15 nothing you might know better in terms of their annual growth rate of revenue. So what will change for multiple expansion or will their growth rate change for us to see an upside from here? That's what

I'm looking at. Maybe the downside is not that much because if they continue doing what they're doing, we will continue to have the same multiple hopefully and that's the other risk. If the market itself reprises multiples, will it impact Microsoft shares? So it's a very good pick from that perspective as like, you know, it's almost like the ADYL consistent grower has navigated multiple trends or cycles. How will they fare in this latest disruption, the AI trend? That's the one that we need to look at it. In fact, in one of the podcasts, Sabthia himself said, hey, with AI coming in, a lot of software

might be completely disrupted with AI agents and whatnot. If the paradigm itself is shifting. Now, what would it mean for Microsoft though? Because they are heavily into, you talk to spreadsheets. What if I can just ask questions and not use spreadsheet to analyze my data? So will I even need Excel at that amount of time? So there are a lot of such questions that are being asked. At the base which models are making progress, they're becoming more intelligent, it will be hard.

Maybe Microsoft can take advantage, but so can somebody else do. And Google has its own model too, and we cannot discount Google in this, basically. And they have the close third in the public cloud race. And so is AWS. So Microsoft didn't have these formidable competitors in enterprise phase. before 2015, 2016, it was mainly Microsoft and then maybe IBM. Neither AWS, Amazon or Google were a formidable players in the enterprise. So it's no longer that Microsoft is the leading player in the IT in Google and Amazon are making good progress in that and sometimes eating over Microsoft's lunch.

So it will be the battery within these three. And in that, how much Microsoft can afford to grow and keep up its growth rate? That's number one. Number two, what's the investors appetite for a high need market? But if we go by the thumb rule, as they call it like, you know, price to earning ratio is equal to growth margin plus a EPS growth rate or a profit margin plus EPS growth rate. or profit margin plus EPS growth rate, they are healthy within the range because their profit margin is 35% their growth rate is around 19%.

So you can say it is justified at this part of time. But that depends upon the investors continuing to afford this multiple of 35 plus. So I think for me, definitely business is not at risk, it's a stable business, it has a lot of diversification, made into it, but the risk is good. Yeah, Harry, thank you for your feedback. Someone out there is probably tuning in, and they were like, oh, is this like a value investing podcast? Like, the first guy, he pitted something 23 times sales, the next one in 35 times earnings,

what's going on? So there are quite a few things I wanted to point to here. The first one is about the multiple. I think you're absolutely right, and that is a risk. you're not going to see a lot of multiple expansion. I would be great to surprise at least at this level. At the time of recording, Microsoft is trading at, what, 450, but just after the tariff announcement,

it was almost touching 350. So that was probably the time that you should have made you move. And this is also why we talk about stocks here in the mastermind episodes, and then we put different things on a watch list. So whenever something like that would happen, we can build up positions. So, you know, one of the many mistakes I've made. And I remember talking about Amazon so many times in this show. And we started in 2014. And I always had this idea that Amazon was just too

big. It was just, you know, how can you make money out on a big company? And for whatever weird reason, I took a position in alphabet back in 2018. And I remember feeling sick to my stomach. And yet, I still did that because I had this idea that, hey, you have to invest in small companies because if you don't do that, like, how can they continue to grow? And so I missed the boat on so many of the big tech companies because the multiples just seemed outrageous. And I was always thinking, there's no way they can continue to grow at that pace. Now, whenever I'm looking at the past decade for Microsoft, highest-smallic company in the world, We talk about 16% care in operating income.

It's amazing. We're dealing with a company with more than 20% return on capital-on-employed. Now, how long can they continue doing that? That's going to be the question. And whenever you're going to sell, what is the exit multiple going to be? I'm definitely going to recommend anyone buying anything into 35 times earnings. That's not so much my point. I think your entry point has to be a different.

But I think I've been amazed to see. And there's probably something mental. you know, in terms of whenever the first company started hitting the one trillion dollar market kept like, oh, who, like this is, this is just a new ceiling. And then it just kept on going on. So, you know, what is it that you goberra said? Something along the lines of if it can't go on forever, it will stop. That's probably also the case here. What I would say is that I am very bullish on their cloud computing division. We're probably looking at something that is just short of a trillion dollars like for the entire industry,

and not just for Microsoft. And that's probably growing with 20% Kager right now and for the foreseeable future, perhaps a decade, perhaps longer. Like, it's vast. And, you know, whenever you go through the earnings call and the same with the alphabet, they talk about how they constrain by capacity. And sort of like a bit to your point, Harry, about adding, and like there is this, yes, they do get new users on, but it's also about, you know, the customers just getting bigger.

They grow so much from that, and it's not too different because with a company like Microsoft with the cloud services, then they need more cloud computing. So I found that to be quite interesting. Now, I'm not sure what to make of commercial 365. That has been a massive tailwind for the longest time. And for obvious reasons, that growth has started to taper off just because there's only so many people that you can convert from one system to another or from a life. to recurring revenue and there's only so many people out there. And I think you brought up a

very good point, Harry, about do we even need spreadsheets in the future? I kind of feel that's probably a bit about my pay rate to answer that. I think you have a great point about, you know, software just general being disrupted. And whether it leaves Microsoft, are there going to be, you know, the very infrastructure of handling everything and how they're still going to capitalize on that? I don't really know. I very much like your analogy, Harry, whenever you're said, it's the new IBM. Let's hope that they look into a different destiny, though, if you're long. In terms of, I think you also asked Harry about valuation, I'd probably say at this valuation, single digits, high single digits, I'll imagine at 350, I did the modeling and there's a ton

of assumptions that doesn't go well into doing a podcast. You can then model, but I would say that 350, you'll probably see a lower double digits, but probably not at this level. Toby? You got a little bit unlucky Stig with it running up so quickly. I'm sure you were preparing for it at much lower prices. I think it's very, I think it's, you make a good point. You make two good points. One is that you shouldn't ignore the very big companies just by virtue of the fact that they are very big and are very successful. I remember looking at Microsoft in the 1990s and thinking it was all over because it had run so far. far and so it's only up a few thousand percent, 10,000 or 20,000 percent since then. So clearly,

that's not the right thing. And the other thing is that 35 times earnings or 20 times sales, that these things are expensive, it's not necessarily the case. It may be that they are very, very good businesses. It just becomes increasingly less likely. Although for Microsoft, it's certainly proved it over a very long period of time. I think your worst case scenario with Microsoft here is you just get below market returns because you're slightly overpaying. But I don't even know if that's true because it's clearly growing at a well above market rate. And maybe it's a little bit overvalued here, but like maybe 20% or something like that. And so you're still going to get, as you say, high single digit returns without knowing. And I don't think

anybody's switching anytime soon from Word or Excel or anything like that. I think the challenge is as you point out, the AI, if people just start interfacing directly through an AI chatbot and the chatbot is able to put together those spreadsheets more efficiently, you know, pull the data, now put together a table the way that I want to see it rather than you're having to do it. Maybe it's able to back end into something a lot that's a different kind of spreadsheet developed. Maybe you can do it itself. But I think that's sort of more of a, it's a little bit more abstract, that risk and it's harder to handicap how likely that is. I think behavior changes really slowly, so I don't think it's happening anytime in the near term. I think there are

folks who are early adopters of the AI. I think everybody is using probably a little AI chatbot to some extent, but it's a long way from really having that become the dominant. I certainly still use, I use Google spreadsheets more than I use Excel, but if I have a thing that I need to use, So it can only be Excel. And I prefer, I actually are writing Google's version of Word too, but I think that if you're going to produce something for production, then you have to use Word because it just has more functionality. I think it's a very safe pick.

And I think it probably delivers sort of slightly lower returns because it's so safe. But I don't think it's you can go wrong with something like Microsoft. And I think you're probably likely to be ahead in five or ten years time. So I think it's a good safe pick. Yeah, I think that's a thank you, Toby and Stig. This is a very interesting big. Steve, I am also curious, what's your expected return that we are looking for for the next five years at this price, current price? Oh, that's probably high single digits.

Call it 8%, something like that. It's not too interesting. And on that note, I would also say that the average volatility of Microsoft is 33% compared to 18% for the the SNP 500. So, and of course, they would change depending on the time period. But to Toby's point, yes, this was not the right time to pitch it. There were a different time where it was perhaps a bit more appealing. But whenever you look up the volatility of a stock, and especially if it's significantly

higher than the market, you can also sit on your hands and wait. It's not like Microsoft's underlying model is, or Microsoft, the underlying business model going to change that fast. And just revisiting this point here, you said about spreadsheets. And this is probably my lack of imagination. We talked actually about Gemini here just before we started. I find right now chat divot to be a better option. Who knows? And I kind of feel like, you know, considering Microsoft investment that was going to happen. That's definitely above my pay grade. Again, my lack of imagination, I've tried working with spreadsheet, because I would typically speak with chatypte about a lot of financial stuff.

spreadsheet functionality right now is absolutely terrible. And this might be a bit of anecdotal, but whenever I look at other people's Excel sheets, like really smart people's Excel sheets, I have a really hard time understanding what they're doing. And to them it's like the easiest thing ever. And we're not talking about complex problems, just my ignorance. But I guess that everyone who's seen everyone else's Excel spreadsheets, explaining what you want to do and how you want to do it and what you have imagined, explaining that to chatbot, it's just, I don't know, again, my lack of imagination,

or I find that to be disrupted relatively late. But, you know, whenever I grew up, we, you know, we didn't have internet, which makes me sound super, super old. What I find myself, even whenever I use chat TPT, I would use it and then I would include whatever kind of write-up and then I put it into a Microsoft Word. document and then I'll sit and edit it afterwards. That's probably not how young people do it today, but you know, that's how I do it. So a few more anecdotes here to Microsoft.

If I can try to be my own devil's advocate, perhaps I read way too much into it. I really like to read the CEOs letters to shareholders. And I really like to see if I can feel the founder, or in this case not the founder, but the CEO I can really feel their soul for the lack of a bit of words. Whenever I read Satya's letter, it sounds very investor relations. I don't feel I know who I'm speaking to. And I probably have way too high standards from reading Buffett's letters. But it feels like it's been gone through 10 IR people and it's been beaten up.

And it's like, we make the world a better place and everything should be sustainable. and I'm not against making the burrow a better place. It's just like I'm inclined to say it feels like one of those AI write-ups from chat dbtee where like, oh, that sounds nice, but no one talks like that. It sounds so AI. And so I don't know how many people are going to offend when I'm going to say this. But to me, that's been, again, the result speaks for itself. So I'm probably over-analyzing the letter.

But there's something about that where I'm like, ah, we need more soul whenever the CEO communicates with the stakeholders. On the flip side, I like how, of course, we all want strong balance sheet companies. I also like that Microsoft doesn't have, you know, $100 billion on the balance sheet. There's, of course, spend a lot of money. They made the activation blizzard acquisition, you know, $75 billion, most of that in cash. And you can sort of like see that on the balance sheet, how they just exploded the goodwill. But, you know, I think it's good, especially companies at this size, they actually do apply

that capital. Also, because they're not Berkshire Hallaway, they're not trained to allocate capital. It needs to be put into work in their own leverage expertise. And of course, the jury is still out in terms of how good the accusation was. Let's see. But I just wanted to note that if anyone is looking at their castle links and what's been going on. So anyways, Jens, thanks for the feedback. All right.

Toby, you're up. Thanks, Stig. So I'm going to pick something that's totally different to what the other two gents have picked. Mine is Devon Energy. It's an oil and gas producer. And I want to talk a little bit about my process for picking this, the stock itself and then the oil and gas more generally. So I, you know, I run two deep value funds, one focused on small and micro stocks in the US and one focused on mid and large. What has happened with my mid and large cap stocks is that they've all got so small that that fund is actually now categorized as a small cap fund as well.

And my small and micro have fallen off the bottom of the Morning Star chart. So they're super, super small. And they're as small as they can get and they are as deep value as they can get. And I think that that's because the market has sort of done this thing or it's separated into the very, very biggest. And you heard a pitch from Microsoft, which was the very biggest of the very biggest. and it's left behind a lot of the rest of the stocks in the market. One concentration of stocks that have really been left behind is oil and gas. And the reason is very simple.

The oil and gas price, WTI, West Texas Intermediate, topped out in 22, around 120 bucks, and it's been falling pretty consistently. Now, it's around $60, so it's halved over the course of the last four or five years. folks might remember in 2020 in the COVID lockdowns, oil and gas went, or the oil price went negative briefly because there wasn't enough storage for oil and then bounced out the other side. And it's fallen back. And that's been driven twofold. One is that there's been a little bit of more supply comes online when prices go up as high

as that. And it also destroys a little bit of demand, which creates that downward pressure. And so that's how we find ourselves where we are now. The short-term outlook for oil and gas is for those prices to keep on falling. And so sentiment in the oil and gas patch is very negative at the moment. Some of these companies are, so there's different types of producers and they have different costs of oil and gas. The higher cost producers, when prices get down like this, and so I should say there's a global picture and there's a U.S. picture. The U.S. picture is U.S. costs are a little bit higher, total cost and also marginal.

cost. The marginal cost for oil in the states, for the most part, is somewhere between $40 to $50, which is expensive. The global cheapest are China and Saudi Arabia and they're at like $20, so they're not destroying supply at this level. They're pumping as much as they can. They're making money at $60. But domestic producers, there are some higher cost producers and there are some lower cost producers. The higher cost producers suffer really badly when the oil prices are down like this and they're the ones that look ugliest. They are also the ones that come back the strongest when the oil price picks up, but you have a little bit of a gamble as to whether they make it or not when nobody knows how long oil prices will stay low. And so the safer pick would be

something that is producing profitably, even with oil prices at 60 bucks, but then the other The side of having a more safe pick is that it won't respond as well when the oil price recovers. So Devon is one of the safer producers, Devon Energy. Their cost to produce oil and gas is about $30 to $40, so they are profitable at this level and cash flow positive. All of their acreage is in the US. So they've got, they're concentrated in the biggest shale in the US. Two thirds of their production comes from the Permian.

They've also got some other holdings in Anadarko, Eagleford and Backin. They've got 2.2 billion barrels of oil proved, net proved, and production is 848,000 barrels of oil equivalent per day. They're producing 73% oil, 27% natural gas, which is not an unusual mix. They've been very good at, they've been very efficient. They're able to engineer some cost savings as they go along, some higher cost acreage, focus on the lower cost acreage. And so they are cash flow positive and profitable at these levels. For the most part, they've been buying back stock. P is currently a little bit over seven times. E.B. What I call the acquirers multiple is a little bit over seven

times as well, which means that they're producing about $3 billion in earnings and about $4 billion in EBIT. Cash flows about the same. One of the risks for oil and gas is that you guys might recall, you know, Buffett's got a holding in Oxy. He took a slide from Vicki Golub, who's the CEO of Oxy from her presentation, which showed that they were going to be returning capital to shareholders. And that's been a criticism of many of the commodity companies and oil and gas companies as well, that they take whatever earnings they get, they put it back into the ground, and there's no real return for shareholders. So over the last five or ten years, they've all got religion about this and they've all started returning capital. And Oxy has been

returning lots of capital, which is why Berkshire, I think, has taken the position. So I like the oil and gas companies that return capital. Selfishly, that's what I prefer. But for the industry as a whole, it's not necessarily a good thing because it means that there's this sort of spent this slight underinvestment in oil and gas infrastructure for an extended period of time now. And there are multiple reasons for that, but requiring a return on capital, which isn't unreasonable, is one of those reasons. But what that means is that this sort of level of oil and gas price, $60 and looking like it's trending lower, destroys supply, doesn't bring as many new oil wells online. There are reasons why they're not investing as much. Oil's getting increasingly

hard to find to sort of make many of these new wells offshore and deep and more expensive as a result or they're sort of these shale supplies which don't return as easily as the old hole as you drop to the bottom of the, you just drilled a big hole and then it gushed oil forever and ever. These, they have a shorter half-life these, the shale oil. So all of the that destruction and pessimism in that sector, I think you are speculating a little bit here. We don't know what happens to the oil and gas price. The oil and gas price, for any commodity, the best guess for the price will be in a year is the price where it currently trades, and that's just to minimize your error because it

could be lower and it could be higher. No one knows. The only time where that sort of becomes less true is when we get down to, we arrive at one of the extremes, either the extreme high or extreme low. I'm not saying that this is an extreme low, I'm just saying that this is a much lower price and a supply destroying price. And there's a lot of geopolitical tension in the world, more so than there has been for a long time between some of the bigger players. If we have any disruption, we will see probably a spike in the oil and gas price. The only, well, not the only, but the risk to that,

is that it's also an input into the economy as the economy slows and weakens the oil price also tends to fall alongside with it. So I like Devon Energy here because I think that it's reasonably safe where the current oil prices are. It's unlikely to lose money. They're doing all the right things, reducing the share count, buying back stock, trying to reduce the cost of rationalize their operations as they currently exist and return capital shareholders through buybacks in the event that the oil price does spike, there'll be a beneficiary of it. They should do quite well. There'll be other higher cost producers that will, the share price will move more. But I like oil and gas as an industry at these prices, and I think

Devon Energy is a reasonably safe way to supply it. So I'm interested in what do you guys think. Let's take a quick break and hear from today's sponsors. No, it's not your imagination. are ramping up, and customers now expect proof of security just to do business. That's why VANTA is a game changer. VANTA automates your compliance process and brings compliance, risk, and customer trust together on one AI-powered platform. So whether you're prepping for a SOC 2 or running an enterprise GRC program, VANTA keeps you secure and keeps your deals moving. Instead of chasing spreadsheets and screenshots, VANTA gives you continuous automation across more than 35 security and privacy frameworks. Companies like Ramp and Ryder spend 82% less time on audits

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I think this is an interesting pick, and there is something to be said about whenever the world is just turned against you. That's whenever you need to start paying attention. With the oil price dropping like you mentioned, also with the tariffs and now, you know, equipment for drilling and, you know, casings are going up. So like, we're talking about seal here. And so a lot of the raw inputs that they need to use, and they're already not low on the cost curve, like, there's just so much pain right now for sale producers. But one of the wonderful things about investing is that whenever the market feels that there is pain that typically sell out, And so sometimes you can still, you know, find something really good, at least, you know, compared to the price.

So I'll be the first to say, I love the price. And so with that being said, here comes all the negative things that, and some of that, you know, Toby already alluded to. I'm always worried whenever I enter a commodity type business and you're investing in something that's where you're not the lowest cost producer. And of course, like you mentioned, Toby, you're well, aware of that. I know I'm not telling you anything new. And that's just the way it is if you're not based in Saudi Arabia. You're probably not the lowest cost. But US Yale is just higher up on the cost curve and you can't really, you can blame geology. That's just the way it is. And so it's difficult to make money at certain times. And one of them is right now. So you have a higher downside or at least

you have to figure out can they sustain themselves? Would they be issuing equity at stupid times and where you would get diluted if this long period of all prices being low, if that extends. So you sort of like have to have to figure that out as a part of the investment thesis. And so you want to make sure that you invest in companies that can withstand the winter. But if you are right, you typically also get a much bigger bounce up than compared to the ex-emobiles of the share runs of the world. And so, you know, Toby mentioned before that, you know, he might be holding them in a basket approach. And I kind of feel that's a little bit different whenever you have it in a basket. Generally, I'm quite bullish, especially at the current multiples, the oil and gas sector.

But there are a lot of things not to like for the company like Devon, where, you know, one of the things that they put on in their investor presentation is that you put in their credit ratings. It's like, oh, we're like BAA2 and you're like, is that good? it's not. So, and so that's the Moody's rating. And so they're not boring at, you know, the same low rates as, as the competitors. They say that they have a low net debt to EB-Dax ratio. And you're like, they just, they stick at EBITDAX? Is that, didn't you mean EBITDA?

So EB-DAX is, the axis before exploration. So it's sort of like, it's not like crazy that they would use something like that, especially if you're, if you're upstream, it's something that you would, you would include. But even so, 1.0, I still want to say it's sort of like on the higher side. So even though that they are relatively efficient, it's something I'm a bit worried about. You have to be good at figuring out where you are in the cycle. And the cycle is by and large, well, it's controlled by the oil price. And it's really difficult to figure out what that is, even though you might make a somewhat reasonable estimate. So just before recording here,

Saudi Arabia came out and they said that they want to, you know, punish some of the, the people who don't follow agreements in OPEC, and there's always a reason not to follow what they read on. And so they're all producing themselves and they're precious the oil price. So you're sort of like, you're dealing with, this was just one anecdote, but you're dealing with so many different factors where you just have no control over. And if you also then don't have a good credit rating, you're like, this is tough. You have to borrow.

And so whenever you look at the share count, I kind of felt it was interesting to go back over the past 10 years. And so whenever you go back in end of 2015, you had 411 million shares. Then you went up to you know, 524 the year after. I won't go through all the numbers. But then in 2020, it was down at 383. And then the following year, it almost doubled to 677. And since then it's sort of like gone, you know, it's, it's been a bit like a like a roller coaster. So going to Toby's Pind, Yes, it's definitely true that they return money to the shareholders, like roughly one-third in dividend, two-thirds in share buybacks, but also know that they're issuing shares to continue to make investments.

Because it's shale, it's a little bit different than a, let's call it a normal oil well, whether you have like, what, 5, 10%, like you have that initial declining rate. Whereas for something like shale, you have like the first year, it's like, boom, 60 plus percent. like it goes very, very fast, it's tight oil. And so again, you could just blame geology if you want to. But so it's tricky. And so whenever you look at, for example, they made like a $5 billion investment here in September 2024, Grayson Mills, 3.25 was in cash and 1.75 was in stock.

And so it is part of the business model. I'm not saying it's a bad business model. I'm just saying it's part of the business model. And so it is something that gives me a little pause. But coming from the guy who pitted something at 35 times earnings, I very much like that the market has turned sour on Devon and I can easily see the stock price explode if when the oil price goes the other way. So with that said, I'm going to throw it back over to the group.

Yeah, I think it's an interesting pick Toby. I think I see a couple of things here. Number one is it's attractively priced. I just said low-cost producer with a stable dividend. now at almost 3% dividend yield. So you get paid to sit and wait to see how things play out and you're reasonably confident that their balance sheet is strong and their overall productions are not impacted.

So because everything is in US, so there are less risk of any geopolitical instability. So a lot going for them. It's like you just sit and collect a 3% dividend. If nothing else happens, if there is no catalyst and you're reasonably value. at this point of time. So that's what I like about it. It's like almost buying a bond with an option. Couple of things in terms of changes that are coming in. Number one, with Trump administration, being pro-drill, baby drill, that means there may be less regulation within US for them to

increase production. So that's number one. So that can be negative or positive because it can increase supply. But at the same time, there might be also. more open to more acquisitions in terms of regulations. So there might be less regulatory hurdle for say Devon to acquire more reserves or oil fields or gas fields. So that can be expansion and we have to take it with the crane of salt because they already kind of paid $5 billion for one of the latest acquisition on Grayson. So we don't want them to overpay anything. So that's the other aspect I see has changed coming in. So from a regulatory perspective. The third thing is, in terms of headwinds, if the Ukraine-Russia conflict is resolved,

you have another producer coming onto the market. What will it do for the oil phrases? Will it further pushing down? So that's the other concern. Our uncertainty we have. Same with Iran nuclear deal. If that happens, now Iran also comes into the market. suddenly oil is cheaper much cheaper and then it gets closer to their break-even price of 35

it's highly unlikely but i think that's one other possibility but i think where i'm also seeing a optionality for them is we were just discussing about a i and if u s really wants to compete it has to build a lot more capacity in terms of compute and that means it needs a lot of energy and And there were like Eric Shunti in the podcast was saying, we probably need 90 gigawatts more, which is like one gigawatt, power is almost one city. And then gas, natural gas, 30% of the reserves is natural gas. And that's where there will be a lot more demand because I don't think we can get all that energy from nuclear.

Like, you know, we might have to be like 50, 60, 70 nuclear plants. I don't think that's happening in the short term. in a hydroelectric, I think we don't have much there as well. Now solar and wind cannot pull the weight. So it's natural gas. And coal is not the best option. So that might be a tailwind for them because suddenly the demand for natural gas will soar. It's almost like 90 LAs or 90 San Francisco coming up online, suddenly.

So that demand for natural gas can help them and can be a tail win. And that's the positive. The negative is more demand, the more supply coming in because of Ukraine and Russia conflict being resolved or Iran nuclear deal. So that's the head win.

So these are the two, but the way I look at it is you get paid to wait. So worst case, you will still collect your 3% coupon. Thanks for your thoughts, Jens. I think the one other thing I didn't point out was that oil inventories

are close to a five-year low. Now, that might be folks planning ahead, seeing that there is going to be an end to the Ukraine conflict, which brings Russian oil back online and a few other things like that. So maybe that's an indication that folks aren't worried about the future. It's also possible that they've just been letting their oil and gas run down. But I think that when oil inventories get low like this, any change in the supply or demand picture is pretty quickly reflected in the market price because they have to go to the market to absorb that. So I'm guessing, I think, the move is, or hoping that the move is up and hoping that the evaluations are sensitive to that move where they are. But it's a speculation rather than a real

long-term investment. So I think that, I agree with all of your perspectives on it. There's a lot to dislike about oil at these levels. And I think that the one that the one, thing that I think I have on my side is that the pessimism in the industry is so bad that folks are positioned that way so that the asymmetric move is to the upside if something unexpected happens. And I like those kind of positions where probably we're getting positively carried to hold a position where the asymmetric move is with us. So I like those sort of positions.

And that's the sort of stuff that I try to put in the funds. but I agree that there are. It's not a guarantee. There are certain things that have to occur for it to work out. Yeah, and I think I just want to clarify, Toby, what are you referring to the strategic reserves when you said oil inventory of five-year-low, the US strategic reserves? Inventories.

Oh, inventories in general. Yeah, even the US strategic reserve I remember was depleted. I don't know whether it's back up to the original levels. Yeah, I haven't heard either. would be a good place to do it, though, better than any time over the last five years. Yeah. We're right. So, you know, long term, I'm certainly very bullish on the sector.

There's no way to escape oil and gas as much as we probably want to. But I, whenever we're talking about different investments and, you know, some people would probably say, oh, if you're really bullish on the oil price over a certain amount of time, you know, you can go in and, you know, buy a derivatives contract or whatever. And there's certain ways to go about it. I'd probably say that if you want to cap your downside and you still agree with the old thesis, perhaps you can go with some of the old majors. You know, if I think the Chevrons and the exons of the world, first of all, they consolidated

more of the Shell market. And of course, they do much more than just Yale and also own their supply chain. So it's stacked a little bit different where you get a lower downside, but then also a different different upside. I think you would be just fine, you know, investing in a company like Chevron and then hold it for the next 10 or 20 years from a stock investing perspective. Whereas you can make a lot more money if you time it the right way with a company like Devon, but you can also, you know, on the flip side if you don't get out at the right time. So Toby, any, any concluding remarks here on Devon? No, just that it's one that I own as part of a basket. I do like the oil and gas industry.

Here, this is one I own as a basket, and I like reasonably efficient sort of businesses. I think this is one of the more efficient oil and gas companies. They are making pretty good money at these levels on the money that they've got invested in the ground, and they are sensitive to the upside here. So I think it's an asymmetric bet without knowing that you get the upside, but if you get the upside, then you get pretty good performance out of this sort of position. So that's why I like these sort of positions. Fantastic.

Jens, as always, it's always fun to have these quarterly calls. Anything you guys want to chat about here before we end this segment of the show? No, I think it was great conversations, TIG and Toby, and also I think interesting picks and interesting markets as well. We didn't get time to talk about markets much this time around, but a lot of food for thought, not to think about. So thank you. And thank you, Toby, once again, for

for being the value investor we aspire to be. I kind of feel like, I feel bad about, I can see like this progression I've had for the different stocks at pits where it used to be like single digits and all of a sudden I find myself pitting all of those terrible valuation stocks. It's like, oh, just put it on my wait list and then I'll see what happens. So I kind of feel like it's good, Toby, that you would bring that to the group. And, and Harry, thank you so much for teasing us about tech and all the nuance.

So just thank you for taking the time as always. It's been a tough run for value. I had a look the other day, just looking on various metrics, on various simple price ratios, the cheapest versus the most expensive. And since 2011, it's been a pretty consistent underperformance for, depending on how you sort of measure those price metrics, which is unusual. It's been pretty good our performance over the full data set going back to 1926 or 1963 to however you measure it.

So I don't know when or if it turns around, but I just don't feel like there's a lot of very deep value guys left. I think that everybody's sort of gone up the scale towards a little bit more growth because that's where the returns have been. It's completely understandable. So I think that if we do get a turnaround, then deep value, I think it'll do fairly well because it's just so underinvested. But remains to be seen.

Even my, as I said, my mid-cap, large-cap fund is now a small-cap fund because it's just so hard to find mid and large opportunities that are undervalued. I wouldn't be surprised at all, Toby, if you have the last laugh. I hope so. I just hope I'm not 90 when it happens. Well said. Well said. All right, Jens. Again, thank you so much for making time. Toby, Hari, where can the audience know more about you? I'm on Twitter at Greenbacked, G-R-E-N-B-A-C-K-D. I have a website called Acquireers Multiple. which has free stock picks on it, free deep value stock picks on it,

which is about what they're worth these days. No, I'm kidding. And there are two funds Zieg, which is my mid and large cap, now small cap, domestic US deep value and deep, which is small and micro. And they really are very, very small companies. And they really are very, very undervalued. If there's ever any interest that returns to that sector, I think they'll do fairly well.

I've been surprised at the quality of the companies that have fallen into small and microland. It's very tough for those smaller companies to catch a bid in this market. But I've got a collection of them if anybody ever wants what they're in my bargain bin. I love it, Toby. I don't think you have to wait until you're 90 at all. It has to turn. And I know we said that for longest time, but that doesn't make it less true. How long have I been on this podcast since like 2015 or something? Since 2015, yeah, it's a decade. And I kind of feel like we had this discussion like deep values. A decade ago. Right. Just around the corner. Fantastic.

Hari? Yeah, I guess Moffert's cash talk pole is on your side, Toby. So hopefully, soon. And so, well, thank you both of you. And you can find me on X or Twitter. My handle is Harry Rama. I hang out there. So happy to catch up and engage in any conversations.

Looking forward. Thank you so much for your time. Once again, Jens, I look forward to next quarter. Thank you. Thanks, Dick. Thanks, Harry. See you guys. So in this second part of the mastermind discussion, I'm joined by my co-host Clay Fink.

How are you today, Clay? Doing great. I wanted to have this second segment here of today's episode because I wanted to talk a bit more about a mastermind community. We just had a mastermind discussion and we sort of like borrowed that name, tweeted a little, for a group of up to 150 members that we call our mastermind community. So this is a community we talk about stock investing, portfolio management, and increasingly there was also a life component to it. And a thing that we talked about on that note is really this idea of meaningful relationships.

And a part of me feels that it's a little ironic because our community, our mastermind community, as you say started very much as talking about value investing and talking about different stocks we're looking at, and we still do that, I should say. That's still the very core. But something that has happened quite organically is that I guess, you know, Buffett and Mongo sort of like set the scene for us, right? Where we sort of like, or at least I can talk for myself, where I sort of like found Buffett to learn about value investing. Then I've, you know, learned a ton, but then I sort of like felt I was sticking around to learn more about the life lessons. And I kind of feel like I can't help but say that I see some of the same thing happening in our mastermind community.

Yeah, definitely one of the best things that just the value investing community overall has brought me is just several meaningful relationships and various shapes and forms. And those number of relationships has definitely increased drastically ever since we launched our TIP mastermind community a couple of years ago. And I've just had this great chance to connect with so many thoughtful, high quality people, both online and in person. And I've been pleasantly surprised by some of the people I've connected with and realized just how much I could learn from them that has nothing to do with investing. It's just a phenomenal place to surround myself with people who really are able to help me

in many aspects of life and just serve as a sounding board at times. And meaningful relationships, it's one of those things that can be hard to define since each relationship is different, but it's one of those things where you really know it when you see it. What does a meaningful relationship look like to you, Stig? It's a very tricky question. I don't know. I should probably look it up and someone could define it better. And so, as you can tell, I'm trying to buy some time here.

But it's more like, you know, William would say something along the lines of it has its own frequency. And I think that's a good way of looking at it. But it's a bit like quality, right? where it's like you know it when you see it to your point. And so I think if you put me on the spot, I would say that you have to both benefit from the relationship. I don't have a very scientific approach to this. But you should both leave the conversation that you have

with a feeling of being heard, valued and respected. And I think it starts with shared values. And I should also say that it doesn't mean at all that you had to agree on everything, but you still need to feel like you're hurt and you're respected. And so another way I would look at this is to say that a meaningful relationship

is whenever you feel comfortable being authentic, like really you have to be congruent. And, you know, the test I'm sort of like giving myself whenever I'm evaluating some of my own relationships is that I'm asking myself, can I ask why? And, you know, asking the word why, it can be such a loaded question. Because whenever you ask someone why or someone asks that to you,

you feel like you need to justify certain things and you might feel judged. And so, you know, one way to talk about meaningful relationships is really this idea that you can explore certain or all topics together with your god down. And to some extent, I would say that there's also an element of being in the same place in life and struggling with some of the same problems. And I also kind of feel like that's probably not the best example because you know, you can have a meaningful relationship with your child or or with your parents. And by definition, you're not the same place in your life with a child or with your parents. So, you know, if you allow me to digress a bit here, you know, I have this

at least, I'm going to say wonderful calls. I don't know if anyone else feels that are wonderful. To me, they're wonderful because I, you know, once a quarter, I have these episodes. together with William and the next one is coming out here, the weekend after, after this one is going out. And it was quite interesting. So after the last one came out, I got quite a few people who asked me, so what are you talk about after the episode, which I kind of find to be quite an interesting question. I've never gotten that question before.

And for whatever reason, I got multiple people asking me for the first time ever. So what actually happens after you stop recording? And I hope this doesn't come across the wrong way. but we actually talk about what we just talked about. And we do that with a different level of transparency. And I can't speak for William at all whenever I'm saying this. But I feel that whenever, not because it's William, if anything, William really gets me talking about a bunch of wonderful things.

But I feel like because it's being recorded, I am holding different things back. And perhaps it's just because I'm too self-conscious, perhaps because I'm worried about being judged. I don't really know. And so we actually talk about what we just talked about. And then we sort of like feel like I was to then say to willing, oh, you know, this person that talked about here. There was actually this specific person. So anyways, but I would also say that the things I struggle with today are just different than what I used to. And I guess someone is just a reflection of being older. Someone is also being in a slightly different financial situation. And, you know, I I feel like, and now we're coming back to the whole safe conscious thing here, I feel like

I can come off as such a jerk whenever I talk about some of my problems. And, you know, that's sort of like one of the things we talk about on those quarterly episodes. Because, you know, for the longest time, my goal has been to do what I want to do with whoever I want for as long as I want, which is something, a concept I talked about a few times here on the show. And so I once thought that that was a destination, right? Like, once you get to that destination, you're in Nirvana, like, you don't have any problems. Everything is amazing. There's, it's, and so the world just isn't that kind. And so, so there's sort of like that component where you almost still want to talk about some of the struggles, but perhaps you just sort of want to do it in a different

format, I guess. And so before I pay myself too much into a corner, I think I need to transition to another thing here, talking from a purely business perspective. You know, another thing where I really enjoyed being a part of the mastermind community and continue talking about these meaningful relationships is that we can talk about these your niche topics that only very few would have an expert knowledge in. So one example I'll come up with is that I've been looking to acquiring private companies and I don't know what I'm doing. I like to think, I know a thing and too about, you know, public equities, but I certainly don't

know anything about acquiring private businesses. And so, and that's sort of like, that's, that's a tricky situation to be in. You know, I work with lawyers, I work with consultants, and for whatever reason it seems like, I actually do know the reason, because it seems like the, the main thing they would say that I need is that I need more billable hours. I need more consulting. Apparently, that is that's what I need to be doing. And so, so I feel like with the mastermind community, I can be very blunt and I can be like, hey, guys, you sort of like know what I know, but then you actually know a lot more than me. You actually know the game.

So it's almost like having a support group. And I think it comes easy to us, even though in a way we don't know each other. It feels like we do know each other because we share so many of the same values. So it's sort of like you start from scratch. But then you also don't start from scratch at all. And I feel like the advice I can give, especially because I'm such a rookie, is just more genuine in a way because, you know, it's not like the mastermind community members are, you know, they're not lawyers wanting to give me billable hours.

They're more like, they're probably like one step, two step, or three steps ahead of me in terms of acquiring businesses. So, you know, we have a different type of conversation about that. So anyways, there was a lot of. long rant and I've covered way too much there. But like meaningful relationship is a lot of different things. I guess that's what I'm trying to say. Yeah, it's funny you mentioned talking about a private business. We had we just had to call the other week with a member who outlined a private transaction he did as a two million dollar deal. And he just, you know, is totally transparent walking through

all the details. And that happened to be, you know, one of our most popular recent calls. So it's funny you say that. And I really liked how you mentioned that, you know, a meaningful relationship is one where you feel seen, you feel hurt, and you feel respected. And you can really just be your authentic self. And I often catch myself telling others outside of TIP that, yeah, stags my boss. And it's kind of weird for me to say that because internally, I don't really view it or approach it quite like how I would, you know, approach my relationships with my previous bosses. because I feel like, you know, I can just be myself around you. And I don't have to act like I'm someone I'm not. And I think that's a sign that there is a real meaningful relationship there.

And you nailed it that each phase of life brings its own set of challenges. Each stage is different and still challenging in its own way. And it can be difficult to find people who can resonate with the challenges that you're facing. So one of the things I've learned, since day one of launching the communities that just so many people have similar challenges, but they don't have others to bounce those challenges off of others. And many in our group have already experienced some of the things that people are going through. So I found it to be quite valuable for me personally. And another challenge I have with my friendships is that I like to meet people in person

and if I can, which is one reason why I love hosting our events in Omaha and New York City. But, you know, there's many more months in the year to potentially get together with others. For example, one member invited me to go skiing with him in Park City, Utah, which I felt having that time together has no doubt improved our friendship and helped me get a better understanding of who he is. So I'm curious to hear, you know, being all the way in Denmark, how important is an in-person component to you in a meaningful relationship? Yeah, I think it's very important, even for an introvert like me, who tend to be a bit of a Herman at times and not go out as much as I probably should.

You know, I was on a call with one of my members and she said that online is kind of like what happens after you meet in person. And I think everyone's different, but I think for me it's sort of like the opposite. And I think virtual meetings are great, but I also think that there is, like, there's almost like a different state of mind. You know, it couldn't even be as symbol as the time of the day, you know, and so we're speaking morning for you, your central time, your seven hours behind me. And so it's almost like, and in other times, like, if you're speaking with someone from the West Coast, it's nine hours, it's almost like, hey, I just got up.

And I'm like, oh, I'm just about to have dinner. So, like, I think you bring up a good question. And if I can continue on this idea of state of mind, you know, whenever I'm on a Zoom call or a team's call, whatever it might be. So very often, you know, those calls are scheduled for like 45 minutes or 60 minutes. And I would have a new call coming up at the top of the hour. So I think part of it is just like you're just restricted for time. There are just some things where you're like, oh, I'd really like to explore that.

but I have 22 minutes left and then there's another call. So I think that's probably a part of it. But anyways, I tried something new this year. So far it's been a lot of fun. I don't know if I'm going to do it next year. But what I've done this year is that I've made an open invitation to our mastermind community and to come here and this meeting, always Denmark, where I'm based. And so quite a few people the first time I've said it, they actually thought I was joking.

And joke, not in the sense of I didn't want to see them, but just more because, hey, dude, I'm in another content. It's you. What do you mean? What do you mean? It's like, like, I would ever be around. And so, like, super nice people like, don't get me wrong. But I can see that. And then there are other people. They're like, oh, that's cool. How about this date? And you're like, okay. So I think it's also because, you know, we have quite a few members of our community. Like they travel all. all the time. And so for them to swing by, you know, which of course is a little bit easy, if you're based in Europe, then you're based North America. But like, you know, so for example, this year, I don't know how many I'm going to be hosting, but I'm going to have probably 10 people, perhaps even more, from three different continents, which is absolutely amazing. And so it's

sort of like a way of trying out this new thing where I want to see if I can bring the world to Orhus, even though as digital as the world. has become, you know, it's nothing really beats meeting up in person. And he even had a, had a, had a friend and community member who just swung by for lunch and then you flew back. And that was only to lunch, but even so, I'm like, wow, you weren't even here for two hours. Like, that was like, that was really cool. I, please, I, this is not my way of saying come and visit me and don't see me for more than two hours. I was just like, wow, that's, that's a first. That was pretty cool. But anyways, living through it back over to you, Clay.

Yeah, I mean, there's certainly a totally different element when you're hopping on a one-on-one call versus getting together in person. We just got back from our events in Omaha, and people just tend to let their guard down. Many people tend to let their guard down when they get together in person. And just about every time we get together in person, one of my big takeaways is just how many wonderful people we have in our community. you know, there's one gal who came to Omaha, and I think the big reason she goes to Omaha is just to surround herself with wonderful people. She's not going to be, you're not going to find her talking about some individual stock with another person, most likely, if I had to guess. But, yeah, I think, you know, a lot of people go to Omaha and are part of my community because they want to surround themselves with people that have shared values. And when I hop on calls with new members of our community, I'm often asked where I want the community

to be longer term. And it's such a shockingly simple yet difficult question to answer. I've really come to realize that I really want the mastermind community to be an outlet for just wonderful people in the value investing community to connect with others. Perhaps it's a place to talk stocks and share investment ideas or perhaps it's a place to reach out to a fellow member to chat about challenge you're currently experiencing in your business. You know, as a host of we study billionaires like you, I found it challenging to build a meeting full of relationships with others in our, just the overall community, since, you know, everyone's busy. You don't want to feel like you're bothering anyone. So, you know, we really put this

group together as a tool to be used for networking with like-minded people. And we've actually limited the group to 150 members in line with the Dunbar framework. And for those in the audience who perhaps don't want to commit to, you know, recurring group where we're getting together each year, we're doing calls all the time, we actually put together our summit event where a small group of us are getting together in the mountains of Big Sky, Montana for a weekend in September. And selfishly, it's another way for me to just surround myself with more wonderful people. So I've been toying with this framework of trying to maximize the number of tasks where, you know, I'm just around people in doing things that give me energy instead of drain me of energy and the mastermind

community and the summit have been excellent avenues for me to help solve for that problem. Yeah. And you know, Clay, I love that you bring up this point about selflessly wanting to attract high quality people into your life. I mean, I couldn't have said any better myself. And it really goes back to this point about meaningful relationships. You know, there was something to be said about high quality people having high quality interactions and you're just like left for this positive energy. And it's something I've considered quite a bit because, you know, I want, like I'm sure so many others listening to the show, I want to make sure I have sufficient time for friends and family. But I also feel I owe a great debt to the value investing community and,

you know, making sure to pay back for everything. that I received. So, you know, I used to think that one thing came at the expense of another. So, like, every time I worked on something with TEP, like, I couldn't be with family and friends. And sure, there is an element of truth to that. I'm not saying that everything is play. And, you know, it's like, that's not at all where I'm trying to get.

But I still think that I'm by no means very good at this. But I try to blow the lines a bit. And that's been a very good experience where, you know, you know, I'm. you find, you find friendships within the value investing community that just comes with a, it's just on its own frequency. And it's not like they're competing with your other friendships you have in life. It's not because they're better. It's not because they're just different.

And I think a part of it is that there are so many, so many things between the lines, so many values that you have in common. But I also think that there's something to be said about, or at least I can only speak for myself. But, you know, it's, and perhaps, again, I'm going to pull all men down to my level here, which is probably not fair at all. But I think it's quite difficult for many men, they're older than get to make new friends. It's not like whenever you're running around in the playground, you're like, hey, do you want to be a friend? Great, awesome. Let's go on the swings or whatever.

Like, so, you know, we're busy with family. We're busy with work. And so it's sort of like tricky to find friends. And I think one of the wonderful things about, you know, the value investing community at large is that it's almost like you've been friends for years whenever you meet someone because, you know, you read the same books and you listen to the same podcast or whatever it might be. So, so at least for me, that that means something. And it's a bit like, you know, whenever you're, whenever you're flying and, you know, the flight attendants talks about, you know, hey, you have to put on your own oxygen mask first if something happens.

That's sort of like a bit how I feel about this where you need to make sure there's there's room for you. And whenever you are in a good state, that's whenever you can help more people. And I just see that to be such a thing for so many people in the value investing community. The other thing I want to mention is going to sound ridiculous, but I'm going to say it anyway. There has never stopped me before as listeners of this podcast, but no. Anyways, I think that there is something to be said about creating friction. And it sounds negative because friction is sort of like a negative word.

But I think you can make it positive if it's done the right way. And so I have a very good friend. We travel to many different countries together across four continents. And yes, it's definitely been wonderful to see a lot of different sites. but I've always met up with him and he's someone I became friends with as being an adult. It's always been for the conversations. And, you know, having multiple days, you know, we were typically travel for a week at a time, like, and continue on the same conversation.

And so it's almost that friction because it's kind of painful to go to another continent with all the hassle, all that. Like, it almost like, there are certain friendships where you, you know, you can cross the ocean. And so if I sort of like translate some of that and I don't know how this is going to come across. So my apology is if I sound too much too full of myself, if I'm going to what's going to come next year. But I would imagine similar to you, Clay, I have a lot of people who are asking, hey, can we jump on the call and talk about a stock or whatever it might be? And all that is good. I often find myself saying no, I should say.

There's just not enough hours in the day. and at the same time my calendar is generally completely open. So it's sort of like a chicken and neck thing, right? Because like, how can it be open? Well, it's open because I say no to so many things. So I can say yes to other things. And I want to tie that into this idea about friction because it's sort of like a Zoom call is very non-committing.

And sometimes it can just be a time suck to be frank. And so I've sort of like tried turning the tables. and I've said to a bunch of people like, hey, can we meet up for lunch? But here's the catch. Can we meet up in always Denmark? And I know this is probably, again, like two groups of people, like one group is like, there must be a joke. The other one's like, oh, that's great.

How about next Tuesday? So that's absolutely wonderful. And so it's really a question of like, you know, between 12 and 5, that's whenever I would typically have meetings and I would typically walk for two hours if I can't. And I'm going to have lunch anyway. So I'm like, can I put all of that into the same thing? Have lunch with a wonderful person and talk in death and have a five hour long conversation. And so the thing is, and we're going back to this point here about friction, no one stops by all whose Denmark unless they have a purpose. You would know this because you visited me here

like the connections are terrible. The weather is even worse. The cuisine. subpar. An hour's drive to the airport will set you back a few hundred dollars. And the car that's going to take you here is not even nice because you have 180% tax on cars. So O'Hus is my paradise. I don't make any illusions that it's a paradise for anyone else. And so I guess this is my very clumsy way of saying that I'm sort of like creating this friction with our community where if they want to meet me, I would absolutely love to meet them. And of course, there are hits and misses with everything else in life, but you sort of like let Serendipadity happen on a blank canvas.

And what has been really interesting here trying it this year, and I got, you know, I have the next one coming in here. Next week, I got a message from another community member yesterday, and so he's visiting me too. And so, like, a bunch of stuff, like what has been an interesting twist to this, because it used to be so that I would say, say, hey, anyone just sent me a message. I'm bored out of my mind. I don't go out. So, please just took me up. So I tried saying, if they're Clay approved, they're approved.

Because you vet everyone in the community. I was like, this is the best, like, this is the best possible, you know, filter one could get. And I mean that the best possible way. So this is something I'm trying and it's been, it's been a lot of fun. I kind of feel like I am all the older place here in this conversation. But I hope this is. doesn't come across as too much. It's probably too late, but like me being a jerk for creating friction for other people. But it's really like creating a sort of friction to forge wonderful relationships. And so, you know, we have this summit here. We're doing for our listeners, not our mastermind community, but for our listeners, where it's Big Sky Montana. And so we call

the TIP summit, I don't know how many downloads we have in Big Sky Montana. I want to say around zero. That's my best guess. So you have to be very intentional about going there. And so you have to be very intentional about going there. But then once you arrive, you know, it's for a small group. There are like 20, 25 people. All of them are like, you know, you vetted them, Clay. And so you're sort of like you're forcing those thoughtful conversations to happen. And so I guess the best way I can probably put this is that, you know, if you went on Twitter and you did like, ask me anything, you would get all kinds of low quality questions and network with some low quality people. I know there's also some high quality people on Twitter. But a part of it is because there's

no friction. There's no barrier of asking those questions. And so I've sort of like made 20, 25 a year where I'm sort of like tried to flip that. And I don't know. I keep you posted. Perhaps it's a terrible way of doing things. But I try to create friction in my life and see what's going to happen. Clay, I'm going to throw it back over to you. Yeah, I mean, creating friction is an excellent way to frame it. And I think it's an excellent filter. to try and attract high quality people. You know, there's just no friction to clicking, send on a email, asking someone for 15 minutes of your time,

or sending a LinkedIn message or, you know, as many of those as we get. So, yeah, friction is an excellent filter. And, you know, it's why we have the application process for the community. And, you know, if you're not going to take 10 minutes to answer these questions, then why should I give you, you know, any of our time? So for those in the audience who are interested in checking the community out, we actually just opened it back up. We have around 125 members. And again, we're capping it at 150.

We're in no rush to get there. So, yeah, you know, we're just looking to attract just wonderful people into our circle. And yeah, I think you'll find other wonderful people alongside us, hopefully, who are much better than Stig and I. And, yeah, you can check it out on our website. We have a wait list to join. It's at TheInvesterspodcast.com slash mastermind for those that are interested in checking it out. Wonderful.

Thank you so much, everyone, for tuning in to this lengthy episode. And thank you for staying with us all the way to the end. Thank you for listening to TIP. Make sure to follow We Study Billionaires on your favorite podcast app and never miss out on episodes. To access our show notes, transcripts or courses, go to theInvesterspodcast.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.