We Study Billionaires - The Investor’s Podcast Network - TIP750: Generating Alpha, Digital Payments, & AI w/ Deiya Pernas

Episode Date: September 5, 2025

On today's episode, Clay is joined by Deiya Pernas to discuss his investing philosophy, why he sees opportunity for investors in the digital payments space, and why he is closely following developments in AI. After a decade of experience in the investment industry, Deiya co-founded Pernas Research with his brother in 2023. Since January 2017, the Pernas portfolio has published audited net returns of 27.1% versus the S&P 500’s average annualized return of 14.7%. IN THIS EPISODE YOU’LL LEARN: 00:00 - Intro 01:44 - Pernas’ overall investing philosophy that has enabled them to crush the market. 04:49 - How we as investors can go about making predictions about an uncertain future. 09:00 - What poker taught Deiya about effective portfolio management. 15:12 - The importance of understanding working capital. 24:39 - Why Deiya is attracted to the digital payments space. 30:28 - An overview of why Deiya is long Remitly. 45:52 - Why Wise PLC isn’t a major threat to Remitly. 49:12 - Why Deiya is closely following developments in AI. And so much more! 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. Related Episode: TIVP032: Remitly (RELY): Future Multibagger or Stablecoin Casualty? w/ Daniel Mahncke & Shawn O'Malley. Follow Clay on LinkedIn & X. Follow Deiya on LinkedIn & X. 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 ⁠Human Rights Foundation⁠ ⁠Vanta⁠ ⁠Unchained⁠ ⁠Onramp⁠ ⁠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://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. On today's episode, I'm joined by Dea Pernas. After a decade of experience in the investment industry, Dea co-founded Pernas research with his brother. Since January 2017, they've published audited net returns of 27.1% versus the S&P 500's average annualized return of 14.7% over that same time period. In this episode, we discussed their overall investing philosophy that has enabled them to crush the market, how we as investors,

can go about making predictions about an uncertain future, what poker taught Dea about effective portfolio management, the importance of understanding working capital, why Dea is attracted to the digital payment space, and why he's long remitly and wise PLC, the developments that Dea is following in AI and much more. I'm really happy that we could get Dea on the show as he puts together top-notch research and takes a unique approach to really understanding businesses and the value they generate for shareholders, which has led to vastly superior returns relative to his peers. So with that, I really hope you enjoyed today's conversation with Dea Pernas. 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, Playfink. Welcome to the Investors Podcast. I'm your host, Clay Fink, and today I'm happy to be joined by Dea Pernas. Dea, it's so great to have you here. Very happy to be here and looking forward to the discussion. So I've been really enjoying diving into your research in recent months and I've just been

eager to bring you on the show here to discuss a few different themes. Being a host of this show, I've looked at and reviewed the investment track record of several investors. And when I saw the track record that your team publishes, I was quite impressed to say, least since January of 2017, you guys achieved a net return of 27.1% versus 14.7% for the S&P 500. So I'm really looking forward to hopefully learning a thing or two from you here today. Before we get into some of the themes we're going to discuss, how about you just talk a little bit about your approach to markets and how you guys take a differentiated view to investing?

To simplify things down, we really look for two things. We look for companies where their future state is going to be brighter than their current state. So it's all about the future relative to the current state. We believe investing is about predictions. It's about anticipating the future. I don't think it does anybody any good to just try to get an understanding of the president in the current state without having some reason to try to conceptualize what that business is going to look like going forward. So that's the first criteria.

The future state, better than the current state. into what we mean by better. And the second pillar is that your view of what that company's going to look like in the future has to be variant than the broader market. It doesn't necessarily have to be contrarian. It can just, you know, just be variant. Whether it's, hey, I think this company doesn't look that great today and it's going to look slightly better tomorrow, or I think, yeah, this is a great company and everybody thinks it's a great company, but I think it's going to be a generational company and nobody really has similar perspective as I do. So that's what we kind of qualify as variant. When my brother and I, my business partner, when we're talking about companies,

how in the terminology we use to get our focus in the right place is, and we tell ourselves all the time, we will say this to each other all the time, is the motor of the business strengthening? And when you say motor, like people automatically take this something under the hood, that's actually the true driver of motion. And it's the same intuition when it comes to businesses. is that motor actually strengthening? Is what's driving that value to customers? What's driving their ability to gain future customers? Is that getting better?

Regardless of what the actual financials look like currently. So it's not about the current financials. It's about the health of what's generating the financials. And what the finances look like and what the actual key, the motor to the company, what's actually kind of building up that potential energy, so to speak, Those two things can be divergent for quite a period of time. And we can get plenty examples why a business might be strengthening, the motor strengthening

and the speak we use, but the financials may not look great for whatever reason. And, you know, we don't look at traditional metrics of quality like anybody else. And we can get into our take on extrapolation, media version, and so on, and our critiques on that. But hopefully just that gives you a general idea. Yeah, I want to tap into just as investors were in the business. of making predictions whether we know it or not, right? And you know, you've recently talked about how some investors can fall prey to just, you know, taking recent financial results and data and extrapolating the past into the future. You know, I thought that you have this interesting

perspective where you're really taking a fundamental approach of analyzing the current state of the business and seeing where that's going into the future and not letting maybe the recent past play too much into that. And, you know, some of the same. investors, I think, can go as far to simply extrapolating stock returns, right, and unknowingly chasing momentum. And I think it's a good reminder that we as humans just naturally are looking for patterns, right? And that can sometimes and oftentimes work against us in investing. So how about you just talk a little bit about, you know, how investors are in the business of making predictions and how useful past data is in making predictions for the future? If you agree, like, we

do, like you just said, that investing is about prediction of sorts. Then you have to ask yourself, okay, then what data do I look at that actually has signal? And when you mentioned stock returns, and stock returns actually, it is well documented, do exhibit a momentum effect. So actually, from my perspective, it makes a lot more sense to try to extrapolate just based on stock returns than it does based on financials. If you look at financials, financials, and the data is clear on this, they do not exhibit momentum effect. So if you just take a look at all, like, data mine right now, look at all companies that have grown the revenue by 5% over the last five years.

And then you try to say that is there a correlation between how they grew revenue over the last five years versus the next five years? And the correlation of that is very, very low. So that was a big epiphany for us as investors, because I think investors, and it's almost everybody I talked to. It's like, hey, they grew earnings at X amount of it past five years, or they grew revenue at this. and, oh, their peg ratio is whatever it is, and I think it's a good stock because

specs, Y, Z reasons. But the foundation to their thesis is that, hey, because they grew earnings, it's reasonable assume that they'll continue to grow earnings of the future or continue to grow revenue in the future. If you look at the data, it's just not true. The correlation is very, very low. So once you realize that there's no real pattern in past financials for business that is a good predictor of future financials, then it's like, okay, why are, you?

past financials useful to look at? And why are the trends, excuse me, the trends in past financial is useful to look at. And I think that for us, it's useful, but just in terms of building context, like, okay, well, what happened when revenue did this and management? How did they respond? Looking at financial trends can give you an idea of where a company is in its life cycle. And this kind of help you build context once you bolt on many other ideas and understandings, can give you a basis for prediction what the business will look like. The point, the takeaway is this. Financial trends themselves should never serve as a sole basis for prediction in what the trends will do in the future.

And I think that it's not that intuitive for investors think that way. I guarantee most investors you talk to are going to look at a chart and assume that the trends will continue. But for all types of reasons, like maybe the company's writing a trend that's coming to an ad, or maybe they've overhired salespeople and over-spent marketing efforts and, you know, marketing expenses are going to change in the future. And as a result of that, they've seen improving fundamentals. You know, maybe it's a company that, or like a platform company that's raised its take rate a little too high, just continue to bump it up aggressively. And it's

kind of reaching a plateau, and that over-monetization is long in a tooth. Or maybe it's a company that's just mortgages, features in some respect. I mean, there's an infinite number of ways why historical business performance may not continue. So, So that was really big epiphany for us, is realizing there's no correlation. Okay, if there's no correlation, then what do we do to try to build our prediction and that conceptualization of that company's future? I was reading your research this morning, and one of the points I also wanted to bring up was that you mentioned that effective portfolio management is more critical than just being good

at picking individual stocks, which is actually something you started to pick up during your time playing poker during your college years and time. the Air Force. How about you talk about some of the things you've learned with regards to effective portfolio management? Because I think that has to be a key driver in the alpha you've generated today other than simply selecting good stocks. Yes, you said it perfectly. It was from my poker days. You can be the best poker player in the world. In poker, they call it bankroll management, not portfolio management. But you can be the best poker player in the world. But if you have poor bankroll management, you're just always going to be broke. You have to be able to,

to have the right bank role management. And that's part of being a professional poker player. It's very, very similar when it comes to investing. You be the best stock picker of the world, but your returns and be abysmal because you're speculating too much on the wrong name or you're sizing things incorrectly. You just don't really understand how to size, when to add, when to trim,

when to have dry powder in the portfolio, when to have cash, when to be fully invested, or when to be a bit more defensive. And all those things are, massive drivers of return. And especially if you look at just kind of, you just deconstruct your portfolio returns, contribution-wise, and see, okay, where my returns came from. And, you know, there'll often be, there's a bit of a power law there. There'll be a few names that kind of really help things along. We tend to have somewhat higher turnover our portfolio. We tend to run a concentrated

strategy where we have our core positions, which will be weighted around 5, 15%, and we have our starter positions, which are positions, which we would like to, to make a core, but maybe speed is more of the essence there than deep dive research. And sometimes they kind of just have to take a position when you're in the fourth inning of research. So these are names where they have the potential to graduate to a larger position. And then we have speculative positions where their downside is more severe, but they have significant upside potential.

And, you know, Kelly Criterion, which is one of the tools that gamblers use is very, very, I think very, very relevant what it comes to to to about portfolio management. And what the Kelly Groucheron tells you is anytime you have a situation where there's 100% downside, you should probably size smaller, no matter what the upside is, where I'm not sure if that's very intuitive to investors. Investors typically look at the upside and like, oh my God, this thing. Whatever, go up a thousand percent. Let me try to load up in this position when it's the exact opposite mentality that you should

use. It's like no matter what the upside is, if the downside is severe, then you should size down. I think just that key is just instrumental to anybody's ability to manage portfolio. Since we run a concentrated strategy, our portfolio methodology is going to be a little different in some of you guys like maybe 100 different positions. I think averaging up becomes a lot more important than that kind of strategy where for us, initial sizing is extraordinarily important, where maybe it's not really that important for somebody who takes kind of an equal weighted 100 names or something in their portfolio.

So I think there's a lot to portfolio management. There's a lot in the curriculum that I think is very misleading with respect to modern portfolio theory and mean variance optimization. I think that stuff is kind of useful to maybe understand a little bit on an intellectual level. But at the end of the day, you really have to understand exactly what risk means in your portfolio. It's not volatility. It's something else. And try to structure your own portfolio management strategy. One of the things that I see in your approach, you're very value-driven.

And I think fundamentally, even though you might not give yourself that label necessarily, in some cases, you know, you're Meyer, Buffett and Munger. But, you know, you hear a lot of value investors say the same things, say they think independently and whatnot. And then a lot of them just hold a lot of the same stocks. And then I look at your portfolio and I'm just like, I really think this guy does think independently because these are a lot of names that I have not seen before. So I think there's something really here.

And one of the things that I haven't heard you talk extensively about how you view you cash, but it sure seems to me that your team is really willing to let cash build up, you know, at certain points and being really opportunistic in entering some positions. And I think it's easy to say that, you know, markets go up every year. You should likely hold very little cash. But then there's also the case where, you know, at times there's these very extreme dislocations. And if you don't have cash, then how do you allocate to those positions? So talk a bit about how you view cash in a portfolio in this discussion of portfolio management? I think there's few things as terrible from a portfolio management perspective as there being

opportunities out there in the marketplace and you're not having the cash in order to take advantage of them. So, and we never want to be in position where we have to sell a position. It's in the portfolio because we like it. We don't want to be in position to have to sell it to buy something else we like more. We think that makes the calculus more. We think that makes the calculus more complex than it needs to. So we tend to have cash. We idle at around 15% cash. And at the end of the day, the prevailing wisdom is that cash is a drag on performance because, as you said, markets kind of, you know, they go up over time. So the other side of that is that if you don't have cash, you can't take advantage of opportunities when they present themselves. So that's also an opportunity

cost that I think gets lost. So we never want to be in a situation where markets are a little fragile. there tends to be enormous volatility at individual stock levels, a stock that we think is quite interesting, sells off with extreme rapidity for whatever reason we don't have cash. So being able to tactically deploy that cash very aggressively, which I think has to be part of your repertoire if you are somebody that does carry cash, you don't want to be a situation where it's structural. It's like, oh, okay, well, they have maybe 30% cash on Tuesday. Then Friday something happens, and now they're at 5% cash. That's how we think about cash. It's very aggressive or very defensive. I think it's an amplifier of returns, or at least the way that we've used it.

Let's take a quick break and hear from today's sponsors. All right. I want you guys to imagine spending three days in Oslo at the height of the summer. You've got long days of daylight, incredible food, floating saunas on the Oslo Fjord, and every conversation you have is with people who are actually shaping the future. That's what the Oslo Freedom Forum is. From June 1st through the 3rd, 2026, the Oslo Freedom Forum is entering its 18th year, bringing together activists, technologists, journalists, investors, and builders from all over the world,

many of them operating on the front lines of history. This is where you hear firsthand stories from people using Bitcoin to survive currency collapse, using AI to expose human rights abuses, and building technology under censorship and authoritarian pressures. These aren't abstract ideas. These are tools real people are used. right now. You'll be in the room with about 2,000 extraordinary individuals, dissidents, founders, philanthropists, policymakers, the kind of people you don't just listen to but end up having dinner with. Over three days, you'll experience powerful mainstage talks, hands-on workshops on freedom tech,

and financial sovereignty, immersive art installations, and conversations that continue long after the sessions end. And it's all happening in Oslo in June. If this sounds like your kind of room, well, you're in the luck because you can attend in person. Standard and patron passes are available at Osloof Freedomforum.com with patron passes offering deep access, private events, and small group time with the speakers. The Oslo Freedom Forum isn't just a conference, it's a place where ideas meet reality and where the future is being built by people living it. If you run a business, you've probably had the same thought lately. How do we make AI useful in the real world? Because the upside is huge, but guessing.

Your way into it is a risky move. With NetSuite by Oracle, you can put AI to work today. NetSuite is the number one AI Cloud ERP, trusted by over 43,000 businesses. It pulls your financials, inventory, commerce, HR, and CRM into one unified system. And that connected data is what makes your AI smarter. It can automate routine work, surface actionable insights, and help you cut costs while making fast AI-powered decisions with confidence. And now with the Netsuite AI connector, you can use the AI of your choice to connect directly to your real business data. This isn't some add-on, it's AI built into the system that runs your business.

And whether your company does millions or even hundreds of millions, Netsuite helps you stay ahead. If your revenues are at least in the seven figures, get their free business guide demystifying AI at Netsuite.com slash study. The guide is free to you at netsuite.com slash study. NetSuite.com slash study. When I started my own side business, it suddenly felt like I had to become 10 different people overnight wearing many different hats. Starting something from scratch can feel exciting, but also incredibly overwhelming and lonely.

That's why having the right tools matters. For millions of businesses, that tool is Shopify. Shopify is the commerce platform behind millions of businesses around the world and 10% of all e-commerce in the U.S. from brands just getting started to household names. It gives you everything you need in one place, from inventory to payments to analytics. So you're not juggling a bunch of different platforms. You can build a beautiful online store with hundreds of ready-to-use templates, and Shopify is packed with helpful AI tools that write product descriptions and even enhance your product photography. Plus, if you ever get stuck,

they've got award-winning 24-7 customer support. Start your business today with the industry's best business partner, Shopify, and start hearing sign up for your $1 per month trial today at Shopify.com slash WSB. Go to Shopify.com slash WSB. That's Shopify.com slash WSB. All right, back to the show. One topic I haven't discussed in-depth on the show is working capital. I feel that working capital is something, you know, it's easy to overlook because it's

sort of happening behind the scenes. How about you talk a little bit about the importance of working capital from an investor's perspective? Yeah, I think working capital is one of those things. There's the accounting definition of working capital, current assets minus current liabilities. That's not really what is relevant. You have to strip out non-operating accounts from there.

So if when we're talking about a working capital for business, we're talking about intuitively. We don't care about, you know, current debt or cash or cash equivalents. That's not unless you're a finance company, you need cash, cash equivalent to support revenue. But when we're talking about it, it's purely the amount of money in a business that needs to be tied up to support a unit of revenue. And it's going to be different for different businesses. So maybe in some businesses, you need customer service agents to support revenue. Without them, you will lose revenue.

So that should be part of the business. your working capital. So for us, it's really, really important. I think work capital, I think especially depending on the life cycle of the business, if you're somebody who looked at small cap names often, working capital is especially relevant when you have a smaller cap name that's trying to grow. Because when a small cap name is trying to grow, cash is like oxygen. It's not like these larger companies that have many levers to pull and they can finance things in all sorts of ways. You want to have confidence that they can maybe or probably finance their growth internally. And a big part of that is if they have negative networking capital. So if their customers are paying

them ahead of time or they have really good terms with their suppliers, or maybe that those metrics particularly aren't great, but they're getting better, then they're going to have a little bit more liquidity to help them grow. On the other side of that, you can have a company, and this happened during COVID where, you know, a company needs inventory as part of their working capital to support their revenue. And when supply chains are very very efficient, they don't need, they can have just a time inventory. They don't need that much inventory to support a unit of revenue growth. But once things get a little murkier or geopolitically, things get fractured, you know, they're going to need more days on hand of inventory, which is a drag on free cash flow,

because they need more cash to support a unit of revenue. And if that never gets fixed, or if that never becomes more efficient, then that's going to decrease from your future free cash flow. Obviously, everybody here agrees that the value of any business is its future cash discounted present value. And that cash is no longer free to discount to present value. So you need to take a discount on that. So it's just, I think it's very, very useful, especially when dealing with small names or when dealing with structural changes in inventory or relationships with suppliers and so on. So it's something, we spend a lot of time looking at smaller names because there tends to be more, just incidentally, there's more smaller cap names than they are larger cap names.

Generally, always trying to be focused on a company that's growing. So their liquidity now, their finance that growth is exceedingly important. Yeah, there's a couple interesting things about working capital that I can highlight here. I think one is that it can sort of help highlight the strength of a company's moat. So you mentioned, you know, if the suppliers being paid after the inventory is received, then, you know, that's like a business like Costco, right? You know, they're largely being financed by their suppliers because they receive inventory far in advance of needing to pay suppliers.

And that sort of illustrates how the suppliers need Costco, more than Costco needs the suppliers. And then the other point is you guys highlighted something that Joel Greenblatt said where, you know, if you compare a company like Coca-Cola to a company like Moody's, Moody's can largely grow revenue without having increased working capital needs, whereas Coca-Cola, as they grow, they have increasing working capital needs with every incremental dollar of revenue. So with that said, does high working capital needs ever keep you from investing in a company? It's not necessarily they would be high working capital needs. And in Coke situation, obviously, high working capital needs is not indicative that they have a lower mode or anything.

It's just the nature of that business. So you have to take a new one's view, and I think that with, it's more about how the working capital is changing. So if, for whatever reason, they have to pay their supplier sooner or their customers are starting to pay them later, that's something that should raise an eyebrow and you should be asking a lot of questions. It's so why that's the case. So for us, it's just something to be cognizant of, and if it starts changing, you can absolutely affect whether or not you inventing. Like, we just looked at a, I'm not going to name the ticker, but it seemed like their DSOs were increasing. Their customers were taking longer to pay them, and they didn't really release customer

concentration information. And this is a smaller company where they essentially roll up waste haulers. So any business that creates waste, then is that waste taking to a landfill or a compost facility, this trash company would assist them in their needs there. It was just taking longer for their customers to pay them. They had accumulated debt because they're rolling up these other waste haulers. And it just seemed like they're running into liquidity issues kind of where they're headed. This was a company that if we had seen their terms with customers start to get better,

maybe it's possible that we could take into position. But there's just too many headwinds along with the debt they have service and not being able to have that liquidity buffer from negative working capital. So one thing I wanted to discuss today is digital payments. So this is an industry I've personally tended to avoid one reason being that there just seems to be so many payments companies. out there and just it was difficult for me to understand where the moat was for some of these names. So I wanted to be sure to touch on this theme and maybe one or two companies as well. How about just broadly, what makes the theme of digital payments interesting to you as an investor?

So I like the idea of, and just part of our overall strategy, we like to see the just tailwinds for a certain business. And it's better when the tailwinds aren't entirely obvious. But our most ideal situation is we find a business that's a share gainer and there's certain tailwinds in place. So with payments, you have this extraordinary tail win, which is just M2 growth. Central banks are getting 10 to print or print more and more money. Even in a recession, we see M2 growth fall off. There's a whole lot central banks have learned to do since 2008 stimulate to print, and that M2 road is going to just pick back up. But if it doesn't, just like they did during COVID, they'll just start handing people money. So you can be pretty convicted over, just

from the historical record, that M2 growth is going to continue. So if you have a company that has like a scrape on M2 growth, that's obviously very attractive, given, you know, their take rates can remain stable. And if you find the right kind of payment company, like, you know, if you've caught stripe early, for instance, or adding early or something like that, it can be enormously profitable. There's a few payment companies we like, but that's really the broad strokes of it, is that, look, there's going to be more and more money this out there. And if there's a company's lever to just a little bit of that, it could be enormously beneficial, especially since that incremental investment when it comes to a payment company, the cost needed to support an extra

unit of revenue growth is very, very, very low. So it scales wonderfully and the tailwinds are amazing. So it's one of the reasons why we like payment. Obviously, there's a lot of them. Some of them are decent. Most of them are not. But that's a whole kind of gist about why we find payments It's interesting. The other aspect of payments that has made it a bit difficult for me to get comfortable with some of these payment players was the rise of stable coins. So I was just looking at a couple of stable coins this morning, and it just seems like the market gap of some of these is just only exponentially growing.

So for those not familiar stable coins at cryptocurrency that's pegged to a reserve asset, such as the US dollar, and it allows people to transfer these tokens, we can call them peer-to-peer, without necessarily needing a third party. And part of the issue with stablecoins, I think, though, is that if you're in a developed country, you probably don't want the stable coin, you want dollars or your local currency or whatnot. I'd be curious to hear what you're seeing

on the stable coin front. Yeah, I think stablecoins right now are really the domain of the crypto world. And if you look at the usage, it's overwhelmingly like people were buying crypto and it just facilitates it a lot of eavesron exchanges. You're being able to send, being able to hold your money in a stable coin

and then trading for crypto and then going back on a stable coin and so on. And the U.S. government, I think, through the Genius Act, is going a long way to regulating those reserves, to give investors confidence in something like a circle that those reserves are intact. And obviously, that benefits the U.S. government because it creates a sustained demand for treasuries, which those reserves are placed in. So it's in the interest of the government to provide this type of regulatory framework. But if you look at the data, there's limited use of stable coins in the real economy. It really hasn't happened at all yet.

There's some situations in some frontier markets where just the banking system is totally ruptured and people are using them to pay each other. There's a few countries in Africa like that. But other than that, there really hasn't been any penetration at all. I'm not saying there's not going to be, but the market seems to think that remittances are going to be the first to be affected. for remittances being people sending money to others, typically cross, and when I say remittances and talking about cross-border remittances, because they tend to be more expensive.

But that hasn't happened at all yet. And I personally think that you're going to see stable coins as an alternative payment method first before you see it in remittances, primarily because the cost of remittances have come down significantly. And as long as people are continuing to use fiat in their local economy, it's hard for me to suspect, given the cost of remittances, that people are going to start using other methods to send money into friends and family or whatnot. So until their friends and family start using maybe stable funds to pay for things to the local economy, we believe that traditional remittance

providers are still going to be completely relevant just as they were in the past. And those are the services that can be used to transfer money. So we don't think the remittances will be the first to be affected. We think just payment methods will, and it'll start to show up as an alternative payment method, much like you can go away to kind of use Venmo to pay for something at your Walmart or your CBS or something like that. You're going to see that, oh, okay, maybe I can use my staple credit pay for something. And then I think that's where it'll start. And once that penetration starts to happen, then we can start to talk about maybe how it's going to impact for minutes is. But I think we're a very, very long way off. And if you look at just how sticky payment

methods tend to be, like historically, payment methods, even if they're not exactly optimal, tend to stay intact for a very, very long time. So it tends to require quite a sense of urgency for people to switch to a new payment method. So I just don't see that changing anytime soon when it comes to payments or remittances. I think it's going to stay in the crypto space for a considerable amount of time. Since you mentioned remittances, let's dive into Remitly, which is a share gainer in the remittances space. So remittances is just a, whether people might not know this, but it's a massive market. So the World Bank estimates that just over $800 billion in remittances are sent per year. And this brings us to discuss remitly. I've been learning about this company

through some of your write-ups. And then my co-host, Sean O'Malley and Daniel Monka, also did an episode on this company on the Intrinsic Value Podcast for those interested in learning more. How about we start with what makes remitly well positioned to capitalize on this big growing market? Yeah, so I think regarding tailwinds and trends and why remittances continue to increase, and the number is closer to trillion now, why the number continues to increase. If you look at just demographics, I know there's the political climate is quite charged, there's been a rise in nationalism. And as far as immigration tends to be a topic on the top of every politic. list and trying to, you know, quote, unquote, limit immigration. But if you look at meeting ages for a lot of those developed economy, Japan, Italy, Germany, I mean, Germany,

the median age is, you know, 46. Italy is closer to, you know, 48, 49. And even the U.S. is 39. It's not exactly, there's not exactly young economies. And the fertility rate, other than the U.S., and most of the economies that I mentioned, are significantly below the replacement rate. So once you have that dynamic, the only way to stop a population decline is through immigration. There is no other way. So unless you're saying that developed economies

are going to let their kind of whole demographics go upside down and have all sorts of issues supporting retirees, immigration is going to continue in mass. And that's why you're seeing global remittances continue grow up by five, six percent every year. And it's now outstripped form direct investment when it comes to emerging markets. So that is a mega trend that is going to continue to persist and something that we really like, obviously, when looking at business that operate within that ecosystem.

And Remittly has the best in-class digital solution and their ability, I think, to compete with legacy players and their focus purely on the remittance space, I think it just gives them an edge. When you look at the other players involved in the space that are pure remittance providers, like, you know, MoneyRam, Western Union, Aria, and even some of the regional players. And on hand, there's, you know, Y's kind of is in that space a little bit, but not exactly. Their product is solely optimized for remittances and it's digitally native

compared to a lot of the legacy competition that is still sending cash and that cash is starting to, that's another trend where a lot of their cross-border reminces being sent are cash, cash to cash. So you still have, you know,

over a hundred billion or so that Western Union and MoneyGram sends, that's in cash, and that cash is going digital. And it will be another beneficiary there. So there's a couple trends that we really, really like. They have the best digital solution. It's totally optimized towards migrants. They're doing a lot to build mindshare with migrants.

Their marketing engine is really second to none. We don't have many holds in our portfolio that we think our generational holds. And we would hate to say we were ever wedded to a name. But if there's any name in our portfolio that we think we're going to be holding for a every long time, it's Remitly. I just think the economics area work really, really well. Yeah, there's a lot of stuff that I think is really interesting with a name like this. Remedly's market share looks to be in the low single digits. And as you sort of alluded to earlier, payment solutions tend to be pretty sticky. And I think one of the reasons for that is just

trust, right? You know, once customers get acquainted with a way to send payment, they tend to stick with something that they trust, especially as something as important as remittance is, the CEO of Remitly has highlighted this, and I think he understands it. So say if someone's making $20,000, $30,000 in the U.S. and they're sending $200 to another country, let's say India, for example, they obviously want to work with a brand that you trust, even if you have to pay maybe a little bit more in fees. You know, that trust is really important because that $200 payment it might be what's needed to put food on the table for your family, for example. Yes, I think just when it caps of financial services in general,

banks, if you agree that banks, it's very important for banks to build trust, then why can't a remittance provider? I mean, it's very much saying. Somebody walks into their bank, they want to feel secure, their money is safe, and it's the same exact end with a remits provider. They want to have that trust, and the brand is extraordinarily important. So I think there's a lot of people who will try to say, well, oh, remittance providers is kind of a commodity or race to the bottom.

But any sort of finance company that's B to C, that trust element is going to be huge. People want to feel secure about their money. So if that brand, if that mindset with that customer, if those emotions are of that of trust and security, and we're going to do whatever we can bend over backwards, customer service-wise, to make sure that your money gets from point-80.

But yeah, I think that goes a long way. I think it's very interesting when there is a business that is more complex than it actually is, and people think that it's a commoditizable business, and you know that it's not. I think that's a source of area perception. And I brought up the example of in and out in California, which is a burger chain. And from my perspective, and obviously there's some subjectivity to this, but I know there's a lot of Californians that agree with me, there is almost no other burger chain that has been able to produce a quality burger for as long as it and out has, just bar none.

I mean, there's a couple that came on with a habit or smash burger or even ShakeShack, but the qualities, it's not been consistent over time. So here's something that should be like the easiest business world. It's like, oh, you're producing a burger, but clearly it's a lot more complicated than just a cursory glance would tell you. And I don't know anything about the burger business, but I know that it has to be complicated, because, because there hasn't been a competitor to do it as well as they am, not even close. So to me, it's similar with the remittance providers where it seems like it'd be easy, but when you peel back the curtain a little bit, you realize how just how complex certain quarters can be, the makeup of certain receivers, you obviously have to have a cash distribution

network, you have to maybe disperse money to wallets, or maybe have some sort of way to deliver money through just mobile payment or through even on-demand who are in the Philippines or somebody. You can send money at a courier who will go to somebody's house and deliver the money. So, like, being able to optimize for just the different ways people receive money in these different corridors is quite challenging. Obviously, there's the regulatory, the intermediaries you have to have, the licenses, and so on. And then there's fraud prevention and, you know, all sorts of K-Y-C stuff that needs to be correct and totally but boarded at all times. So, like, once you, like, start thinking about all, like, complexity, it makes you realize

that for MENTLIS focus is very, very special. I think another example that really spells out just how complex it is, is that PayPal in his 2015 or 2016, ended up buying Zoom with X-O-O-O-M for about a billion dollars. And it was part of their foray into remittances. And it was like, okay, Zoom's growing with leaps and bounds, and it's going to help us to plan other remits providers in the space. And what happens after they acquired Zoom is, you know, a couple of years later, they totally stopped mentioning it. The growth has been anemic.

It's a total nothing burger. They're trying to sell it that they can't. So clearly, if this business is that easy, Zoom would not have been so disastrous of an acquisition for PayPal. But, you know, there's something more there, obviously. Let's take a quick break and hear from today's sponsors. No, it's not your imagination. Risk and regulation 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 framework.

Companies like Ramp and Ryder spend 82% less time on audits with Vanta. That's not just faster compliance, it's more time for growth. If I were running a startup or scaling a team today, this is exactly the type of platform I'd want in place. Get started at Vanta.com slash billionaires. That's Vanta.com slash billionaires. Ever wanted to explore the world of online trading but haven't dared try? The futures market is more active now than ever before, and plus 500 futures is the perfect

place to start. Plus 500 gives you access to a wide range of instruments, the S&P 500, NASDAQ, Bitcoin, gas, and much more. Explore equity indices, energy, metals, 4x, crypto, and beyond. With a simple and intuitive platform, you can trade from anywhere, right from your phone. Deposit with a minimum of $100 and experience the fast, accessible, and you can trade from your phone. futures trading you've been waiting for. See a trading opportunity. You'll be able to trade it in just two clicks once your account is open. Not sure if you're ready, not a problem. Plus 500 gives you an

unlimited, risk-free demo account with charts and analytic tools for you to practice on. With over 20 years of experience, Plus 500 is your gateway to the markets. Visit plus 500.com to learn more. Trading in futures involves risk of loss and is not suitable for everyone. Not all applicants will qualify. Plus 500, it's trading with a plus. Billion dollar investors don't typically park their cash in high yield savings accounts. Instead, they often use one of the premier passive income strategies for institutional investors, private credit. Now, the same passive income strategy is available to investors of all sizes thanks to the Fundrise income fund, which has more than than $600 million invested and a 7.97% distribution rate. With traditional savings yields falling, it's no wonder private credit has grown to be a trillion dollar asset class in the last few years. Visit fundrise.com slash WSB to invest in the Fundrise income fund in just minutes. The fund's total return in 2025 was 8% and the average annual total return since inception is 7.8%. Past performance does not guarantee future results, current distribution rate as of 1231, 2025.

Carefully consider the investment material before investing, including objectives, risks, charges, and expenses. This and other information can be found in the income funds prospectus at fundrise.com slash income. This is a paid advertisement. All right. Back to the show. What I also find appealing about the Remitly story is you have this legacy player

in Western Union, which based on my own. understanding, you know, has all these physical locations, whereas remitly's uniquely well positioned because they're a digitally native product, right? So it's a bit of an innovator's dilemma problem where Western Union has substantial share today, but they're losing share to players like Remitly. So, yeah, I think it plays well into that dynamic you mentioned earlier where Remitly's a share gainer and they're benefiting from the growth in the broader remittances market overall. Yeah, absolutely. You have this giant Western Union that they're painted a lot. volume is about, it's about 120 billion or so, or really run rates around 80 or so.

So you have this giant player in the space. It's going to just very steadily continue to seed share. They've had to make an acquisition recently of a regional player just so they can kind of show boost their revenue inorganically. But yeah, they're going to continue to seed share and remitly is the direct beneficiary. So you have tailwinds, you have a huge player in the space that is just going to be consistently seeding share. you have just a better product.

I just think there's a whole host of reasons to, just to be really bullish of the long term. So I have no idea what the stock's going to do to the short term. But yeah, I think the fundamentals and their ability to create just robust revenue growth is going to continue for structural reasons. We're recording here on August 19th, 2025, and I believe it was last week that remotely released their quarterly earnings. Just prior to that, you guys added to your position.

And one thing that stuck out to me was that, I guess I should also mention after the earnings release, the stock jumped something like 15, 20%, something like that in that ballpark. But one thing that stood out to me in that update you guys shared was that you said the PE was 17. And I'd be curious just to hear you walk through the valuation a little bit. That definitely sounds appealing for a company that's growing 30, 40% a year at the moment. So yeah, how about you just touch on the valuation a little bit, given that this name

might be a little difficult for some people just to wrap their arms around? Yeah, it's trading under three times revenue. And I think that it's a company that has really not reached its potential profitability-wise. There's so much growth ahead of it that you would almost feel fine if they continue reinveste them and trying to build that growth for the future and so on, which is what they're doing. They're not really pulling the profit labor as much as they can. But even in that situation, yeah, you have a forward PE of close to 20. You have a revenue multiple of under 3x. So I think that from a valuation perspective, if you say that, hey, this company's going to continue to grow revenue for 30% plus over the next several years,

given their growth profile, I don't know how many stocks out there are trading at a similar evaluation. And if you just look at that cohort, I would say they're pretty much going to be top decile as far from a valuation. perspective. So, you know, valuation is clearly important. You want to make sure you're not overpaying. And if you're right about the future vermitly and their growth profile, you're getting it in an extraordinarily attractive valuation today. So, yeah, it's really that simple. This asset should be trading at north of 5x sales, and it's trading right around three. So that's kind of how we look at it. Before we move on to our next theme,

I know you follow several companies in the payment space. Are there any others? you think that are worth highlighting here. I know Wise is one that's also in your portfolio and you follow some other names as well. Yeah, I think Wise is a very interesting company. A lot of people think it's a competitor, remitly, but they play in a much bigger space. If you look at just payments in general or just cross-border money movement, remittance is just a small part of that. You have businesses paying businesses, you have banks sending a lot of money. The space is, you know, 50 trillion or so. And then you have remittances that are around a trillion or other measures cited it to or so on. So Wise is not optimized for the

migrant remittance tam. It's optimizing for another tam that is much bigger, which is businesses paying overseas suppliers or neobangs having to send money around that don't want to go through correspondent banking. So it's really focused on a much bigger market. And that's why it's send amounts are so much higher. It's medium send amounts where remailies around 300. hundred or so and Y's that is significantly over 10x that for as far as their median send them out. So they're completely different businesses. And anybody who's used the Y's app and the Remittly app can understand how different they are.

Wise almost feels like a NeoBank compared to the Remittly app. The remittly app is just permits. As you have a contact center is very easy to send. Totally optimized for that space. But I do think Wise is doing something very interesting. The potential there is quite large. The challenge for Wise is that instead of being. more intermediary heavy, like for Milly, where RIMATLY can go anywhere and pretty much just very

quickly find the right intermediaries and set up a corridor for people to send certain marketing to people who associate with that corridor and get the ball rolling. Where WISE takes some more heavy lifting with respect to integration into country's local rails. You need a certain membership, you need certain licenses to be able to be a remittance player. So they're like, hey, we want to reduce see them out of intermediaries. We don't want any intermediaries. We want to plug into their banking system directly. And then that way we can cut out all sorts of costs and stuff, which I think is great, has worked in some corridors. But getting that regulatory approval is very, very difficult in others. They've already done a whole lot of work and they've already had a whole lot of integrations.

There's just a long way to go, which is also one of the reasons why remittly sends to maybe, I think, around 170 countries. And why is this, you know, less than half of that or so as far is the different countries you can send to. That being said, I think Wise is very, very interesting. Wise doesn't have anything to do with the Visa Network or Remily, their structure is really built on the Visa Network, and their migrants send money using their debit card, and where Wise tries to influence you not to use your debit.

Wise is bad for something like a visa, because Wise continues to grow and grow up, growing, grow. Core networks will feel a little bit left out where, with Remilis is not the same. Anyway, maybe that was a bit technical, But the whole part of it is that Wise is doing heavy lifting to build out like actual piping and need the structure, which I think is very, very useful and can leverage them to a very, very large market if it continued to make progress. So the upside with Wise is quite large.

That being said, you do have regulatory obstacles. So I feel like AI is all a lot of people want to talk about nowadays. It's clear that it's going to be impacting so many industries. What's interesting about AI now is that, you know, many of us can see. see and experience, you know, just how fast some of these things are moving, given the progress of chat GPT and other LLMs. And you and I can probably see this progress on a weekly or monthly basis just using it day to day. And I don't think it's common for value investors to become well-versed on AI because it's an industry that's just constantly changing, has a lot of capital

pouring into it, and it can be difficult to determine who the winners are going to be, similar to how in the late 90s people knew that the internet would be huge, but very few people wouldn't end up determining who the winners would be. So how about you talk a little bit about why a decent amount of your research has shifted to this area of the market? Yeah, I think that part of it is existential of sorts. It's affecting so many industries. You want to know how it's going to affect you.

Similar to like if you were an employee somewhere, you probably want to start learning about AI, how it might affect things or how it might help you and so on. So part of it is just understanding the gravity of the moment and understanding just how huge of a general purpose technology AI was or is. So this is also true. If you look back, I remember reading some transcripts from like 1999. It was Coca-Cola. What does Coca-Cola know about the internet in 1999? But they were even talking about, like, here's how we're going to leverage the internet to improve our marketing efforts and so on. So you can't avoid it. Every company is talking about how it's affecting them or how they're trying to reposition

XYZ or so on. The latest stand on the hyperscalers is close to half a trillion has been invested in training models and data centers and so on. Anytime you have that level of investment going on, it's kind of important to ask, who might be the beneficiaries there? Are there any companies that are taking advantage of this? And we've had a lot of success with especially smaller companies that have been pivoting towards providing some solutions for some of these bigger data setters, given their

energy needs and so on. So I think that you want to know how the world's changing. It's having such a massive impact on how everything's changing. You want to try to understand how things are changing. Whether or not it has any direct investment implications is an investor who always want to know how your world's changing. And we tend to be more attracted to dynamism. We like it when there's a little bit of complexity or people may not know how things are going to, or there's a bit of a fun of war situation. We like to try to analyze the, you know, to be in that area and do some analysis there. And a lot of times you're not going to be able to gain a full understanding that's fine. But I just think that there tends to be more opportunity where there's

more dynamism. You initiated a position in meta in March of 2022. You're a bit early in the drawdown, but definitely captured a lot of the upside as you close your position at the end of July this year, representing over a 300% increase in the stock price over that time period. And, you know, with big tech making up a substantial amount of the S&P 500, many are asking what sort of returns they're going to be getting on this ever-increasing spend on data centers. I'd be really curious to hear your take on how these investments could potentially pan out for them going forward. Yeah, I think that it does seem to be a bit of an arm race at the moment. And I can understand how investors might think there's a lot of capital destruction going on. And I'm sure

not every dollar is going to be spent as efficiently. That being said, if you look at maybe meta's clear example of this, where you alluded to in 2022, we took position and there was all certainly people thought TikTok was going to eat meta's lunch and Zuckerberg was going crazy, investing in VR. And there was that Apple data change that also affected things. So just a confluence of we think narratives that promoted selling, promoted just that rapid price applied. But then you can also see that, you know, meta's response to the competitive TikTok pressures where reels started to massively increase active users and engagement. And it was clear that, hey, they're responding to whatever the market thinks this threat is. And there's actually evident, you can actually see

the progress being made. And with respect to meta, they're using AI to make their ads better. it's already helped increase their top line. So that's probably out of all the hypers, I think the best example of how that's improved, their return on investment, where it's actually helping businesses, you know, just give us the criteria what kind of ads you want to make.

We'll use AI to test 100 different versions and see which one gives you a better return on ad spend. So that's been enormously beneficial for meta. And for most of these hypers, the revenue employees increased dramatically. You just need less developers to produce the amount of work you do. and obviously they're all trading their own models, and it's having an impact already. Whether or not how something like a Microsoft, how that's going to affect their top line

or how that's going to help them increase revenues, that has, I think that remains to be seen. But you're already starting to see mass efficiency improvements for all of them. And when it comes to some of the applications of AI, which ones have you found to be most useful and interesting to dive into and take a look at some of the companies that are developing these new technologies? I think there's a lot of areas. There's robotics is one that comes to mind. We basically have the hardware for robotics,

but we don't have the brain yet. And I think there's rapid progress being made there. It's quite similar to how they trained models to play like chess or go, where it was basically unsupervised. You give it the rules of the game. And then it just plays itself trillions of times. It comes up with these really, I think, unique ideas. is it knows how to play things very, very efficiently.

It's similar to what's happening at Robonis right now. They're testing them through simulations. They're using fiscal sciences to provide just the rules framework around that simulated reality, and they're optimizing for a certain outcome, and then it's running that simulation trillions of times. So I think that brain is coming, and we're going to combine that with the hardware. That's going to have a massive impact, and it's going to be, I think, a very, very exciting future. And that parallels a little bit to defense. I think there's applications in energy.

If you look at data centers, at the end of 2025, about 2% of the electricity being used is going to be used by data centers. So that has a lot of questions for the grid and alternate power sources. And there's a lot of companies that are positioning themselves to provide alternate sources of electricity for data centers. And then there's nuclear that hasn't made the headway that I think a lot of hoped, but that might be in the discussion more and more later. So there's a lot happening in energy.

It's really, really interesting. Biotech we haven't dove into quite as much as we like to yet. Just the speed of drug discovery and using AI to iterate on how different molecules are binding together and just speeding up drug discovery, I think, is going to be very very interesting. So there's so many, I think, applications that, from an investor's perspective, it's just the best time to be alive as an investor. I mean, we're very, very fortunate, I think, especially just the changes. in all these technologies and how it's going to impact our lives.

I'm very, very excited for the future. But, yeah, those are just some applications that I think are going to have some serious relevance for all of this in future. Yeah, it does certainly seem that robotics is going to be more and more prevalent. Even Amazon is utilizing more and more of that in their fulfillment centers and whatnot. Tesla is making big investments into that and even have uses outside of manufacturing use case. Are there any companies in your portfolio that play into this? theme of, you know, researching and better understanding AI?

I think a company that's using AI to facilitate manufacturing, industrial manufacturing, and that's Zometry. And I think the more robotics and these prototypes, these short runs that produce these different types of robots to help facilitate any never-ending human needs, is going to be a huge beneficiary of that, because they provide a platform that enables any sort of manufacturer to submit their CAD designs or whatever those specifications are, and through kind of an AI voting engine, pick the exact manufacturer to help them to produce these parts. So I think that the more and more robotics are being produced, given that a lot of these

robotics are prototype, I think that fits very well in Zomitry's hands, which is a really leverage on digital manufacturing. So we're very excited. That would be one I think that stands at in our portfolio. I have one more fun question before I give you the handoff and close it out here. What is something that you think AI will be able to do in 10 years that would be totally crazy if we saw it today? I think the real breakthrough in AI would be if it helps us solve something that we

scientifically that we couldn't solve. I mean, really, if you look at the physical sciences, there hasn't really been a huge breakthrough unless since the turn of the century. So are they a breakthroughs to be made and is AI able to do them? Is it AI more than just a re-urgitation of data and can it create something actually new? It's already done it in certain games where I talked about chess earlier or Go where it's made a move that no human has ever seen. It almost doesn't make sense for a human perspective. Is that going to happen with something like science that remains to be seen?

And I think that that would be the next huge breakthrough. It just takes the human race to an understanding. unbelievable next level. So, I mean, is that going to happen in 10 years? I have no idea, but that would be pretty exciting. Yeah, I'm reminded of a book I just finished on the story of ASML and ASML and building these lithography machines. They're just, you know, these are some of the most complex machines on earth.

And, you know, no person understands how they work. But I think eventually AI is going to help them figure out how to continue Moore's law and think in ways that humans just can't possibly even imagine. Yeah, just some of those advances on the. techniques are unbelievable and getting down to one nanometer or something. I mean, it's crazy. That level of technological advancement and that arena has been so impressive. So yeah, AI can help us there. I'm just very excited to see you. All right, Dea, well, I really appreciate you joining me here today. For those that are interested in learning more about you and the work that you do,

where can they go? Very happy to be here too. Thank you very much for the discussion. Anybody that wants to learn more about our business, visit us at prononiscerge.com. We produce actionable stock research for professional investors in RAs. So anybody that wants to take a look, that's where to go. Excellent. Well, thanks again, Dea. I really appreciate it. 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 theinvestorspodcast.com.

This show is for entertainment purposes only, before making any decision consult a professional. This show is copyrighted by the Investors Podcast Network. Written permission must be granted before syndication or rebroadcasting.