Yet Another Value Podcast - Alex Morris on what you can learn in his new book: "Buffett and Munger Unscripted"

Episode Date: January 21, 2025

Alex Morris, Author of "Buffett and Munger Unscripted" and Owner & Analyst at TSOH Investment Research, joins the podcast to discuss his first book, "Buffett and Munger Unscripted." You can buy your copy of Alex's new book, "Buffett and Munger Unscripted" here: https://amzn.to/4asUWNi Chapters: [0:00] Introduction + Episode sponsor: Fintool [3:03] Why Alex decided to write "Buffett and Munger Unscripted" [7:53] When did the repetition build up (speaking to organization of the book) [10:23] Incentives and ethical guardrails [21:10] Biggest differences about Buffett over the last 20-30 years [29:53] Nike [39:14] Is there an industry that Berkshire hasn't really invested in after all of Alex's research [41:56] Wal-Mart and Costco [45:27] Predictability and cyclical businesses [49:11] Alex's view of Buffett's thoughts on the market these days [51:55] Parallels between Berkshire to Markel [55:42] Banks [1:04:22] Andrew's thoughts on Academy Sports + Outdoors, and the space in general Today's sponsor: Fintool Fintool is ChatGPT for SEC Filings and earnings calls. Are you still doing keyword searches and going to the individual filing and using control F? That’s the old way of doing things before AI. With Fintool, you can ask any question and it’s going to automatically generate the best answer. So they may pull from a portion of an earnings call, or a 10k, whatever it may be and then answer your question. The best part- every portion of the answer is cited with the source document. Now- if you’ve tried to do any of this in ChatGPT you may know that the answers are often wrong or hallucinations. The way Fintool is able to outperform ChatGPT is their focus on the SEC filings. If you’re an analyst or a portfolio manager at a hedge fund, check them out at https://fintool.com?utm_source=substack&utm_campaign=yavb&utm_content=podcast280

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That's fintool.com. all right hello and welcome to yet another value podcast i'm your host andrew walker if you like this podcast would mean a lot if you could rate subscribe review wherever you're watching or listening to it it is january 10th 2025 we're in 2025 first podcast of the year and i'm happy to start off with my friend alex morse from the science of hitting Alex how's it going it's going good uh it's one of those years where getting back to work feels like things are chilled out again holidays were very fun but kind of hectic i hear that i Well, this was your first holiday with a kid, right?

Am I remember that? Yes, that is correct. Congratulations, man. It definitely changed the holiday. And this time, because your kid, was it April? Am I remember that right? March. This time your kid is just going from blob form to real form, but next time they're going to be running all around.

And neither here nor there. I'm sure listeners don't want paraded advice with two middle-aged white dudes. Before we start, quick disclaimer, remind everyone, nothing on this podcast is investing advice. That is always true. but maybe particularly true today because we're going to be talking about, you know, spoiler alert, Alex wrote a book for those of you who are looking on the YouTube. It is blurring up the book pretty hard, but I'm holding up my hardcover copy. Alex were in a book.

We're going to be talking about the book. The book is Buffett and Munger unscripted three decades of investment business insights from the Berkshire Hathaway Annual Meetings. I'll include a link in the show notes if you want to go buy the book. But we're going to be talking about the book. So we could talk about 100 different companies. Obviously, Berkshire is going to come up for sure. I think disclaimer, Alex has a position, if I remember the signs fitting correctly.

I have a super small position that's like legacy for tax reasons, whatever, blah, blah, blah, blah. Do your own work, it's all the financial advisor, all that with the way. Okay, let's start. Alex, a little bit of a different podcast, but first question I had for you, I told you to hold it until we started recording. Why did you decide to write a book? Yeah, well, first of all, thanks for having me. I know we've been a couple of these. It's always been fun.

It's always fun to go on a podcast you've been on, and well, it's not too fun to listen to it sometimes, at least to listen to myself. But to see the topics we talked about is always interesting to see how things change over time. But they've mostly been pretty good, I think. But yeah, the impetus for the book was the publisher actually reached out to me and said, hey, basically we want to see if you're interested in writing a book. And I had been working on something for a little while that was effectively, you know, kind of tied to my history in the finance business, working at RIAs, was effectively an attempt at answering the question,

how do you deal with an R.A. relationship for someone who is not in the world of finance, you know, think parents, grandparents, friends, etc. So I had started writing that and, you know, there were certain parts of it that were kind of close to home to me, like active versus passive and thinking about what you're paying for in terms of that part of the RIA relationship. But then there were also other parts of it, like financial planning that I'm not as well versed on and also where I'm just not as interested in. So I kind of ran into a wall on that book. So when they reached out, I was kind of like, yeah, I have one idea, but I don't really want to do it. And then a couple days or weeks later, I reached back out to them and said, you know, I've also been working on this other thing where I'm just compiling all the transcripts from the Berkshire Annual meetings and trying to pull out kind of interesting nuggets by topic.

Do you think there's kind of anything there? And then as I thought about it a little bit more intelligently, I kind of remembered that the book that's been kind of most important to me, as a young investor was Lawrence Cunningham's, the essay of Warren Buffett, which is a very similar structure in terms of, okay, here's kind of the key takeaways from decades of shareholder letters on value investing, valuation, management, etc. So I just, I thought about that book and I thought about what happened after they released all the meetings back to 94 back in 2018. And I thought there's probably an opportunity here. I'm basically doing it anyways because it's kind of insightful for my own education and something that I use over at

TSOH investment research for, you know, philosophy discussions and things like that. So why not take the, uh, why not take the next step forward? So after I had started, started writing a lot, I eventually realized, hey, I need to, I need to reach out to Berkshire and, you know, make sure this is actually okay to do. So I think it was in, uh, some point in 20, early 23, I believe, if I remember correctly, that I reached out and said, hey, I've been working on this. Is this okay to do, or am I going to publish this? And then you guys are going to be very upset because I don't want to do that if that's the case. And they wrote back and said, hey, Warren's okay with you doing this.

So that was the start of it all. Cool. And I will say, you know, when you sent it to me, I was like, oh, this is, it's a weird thing. But I thought the way you organize it in particular, because if I remember Cunningham, I read the book years ago, he just kind of threw the letters out. I love how you organize it into different sections. And look, if you read it, it's about 450 pages. I would say of them, you tell me if I'm wrong, 435 of them are just direct quotes. And then there's little blurbs from you at the start of them.

But I really liked how you organize it and said, like, you know, if you want Buffett's quotes on EBIT. Like, it's all in one. And you can kind of see how his evolution evolves over time. And, like, one of the really cool things is, most of the time, like, you can see, and it might be because everybody does this and you might have this as a podcast. Somebody asked you a question and your click were. That's what Buffett says. Your click were goes on. But he, I mean, it's pretty impressive when he click were is in 2015 and it sounds just like it did in 1992.

But let me ask this. Sorry, I'm rambling. I'm super excited about this. Sometimes when I, there's two ways to listen to an company's earnings call over a year. One is every time they come and talk, you live. listen, so you kind of listen to one every three months. And the other is you read them all right in a row. And there's pros and cons to both. But when you read them all right in a row, you'll often learn something just by, you know, oh, they mentioned this in this quarter and

they didn't mention it here, or they keep mentioning this why. Like, I'll give you an example. I read an Investor Day from 2021 that was perfectly normal last week. And then the same company I read their 2024. And if I read them both, I would have been like, oh, perfectly normal. But when I read them back to back. I was like, hey, in 2021, they said they needed to improve their digital app because it didn't take payments. And then in 2024, they said they needed to improve their digital app because it didn't take payments. Stand alone, I wouldn't notice anything. Three years apart, that's a screamer and flag. Reason I asked, you read 30 years worth of transcripts back to back to back. What did you kind of learn that maybe going in just having read these individually,

like you didn't hear? What did the repetition build up to you for you? Yeah, I guess there's, you know, there's a number of different things. I mean, I think one speaks to just who they are generally. I think, one, they have an amazing breadth of knowledge on a large number of topics that they understand at a very base level, which tends to reveal itself in kind of what you were saying in very consistent commentary in terms of that underlying thought process of how they view things. It's very well thought out. It's very rational. it's very consistent. You know, the part of it that's interesting to meet a layer on top of that is where, and you see this a lot during, you know, especially the meetings in the late 90s, but also as they kind of just got older too in the way, and Charlie specifically, the way that they'd answer questions where they'd go, you know, effectively this is the way that we approach things and do things and it's not perfect. It's just the way that makes the most sense to us and that we're most comfortable with. And if that's not the way you think about it, fine, but go figure out your own answer then. And I think the combination of those two, things is where just their wisdom of it all really shines through. It's topics that come up over and over and over again at the meetings. Like, how do you, how do you intelligently pay managers? And when you go through the book and read their answers on it, there surely are numbers and deep thought in terms of how they answer the question. There's also a very basic thought process to it all, which is make sure the incentives align with what you actually want as the owner. And the combination of those

two things is, you know, really where they're genius, but then also the thing that kind of gets the awshuck's nature of it all, or people think it's like a ruse, right? The simplicity of it all. Well, that also is very real. It's just combined with deep knowledge that, you know, in some way shows up as expertise or things that are not totally clear for someone who doesn't have the subject matter knowledge. So I think you get the combination of those things that shine through over decades. And the other component of it all is the nature of the question certainly did change as you went from who they were in 1994 and the audience that was there in 1994 and even the structure of the meeting, right, as they evolved somewhat. What that looked

like, you know, 25, 30 years later was certainly a little bit different than what it was in the 1990s. You mentioned incentives there and this is off the cuff, but let me ask, do you think Berkshire in its present form is doing a good job, is doing a good job of incentive managers. And I will give you two anecdotes that I'm not deeply researched on, so I'm very willing to be told I'm wrong. But number one, Ted and Todd are both in there, right, managing investment. And my understanding is, you know, maybe it's just the cynical side of Finchwick that I see, but my understanding is their investments have not done that well and have almost certainly dramatically outperformed S&P 500. So I would give you that as number one. And number two,

I would point to GEICO, which I think has been losing a lot of share to progress. and I think a lot of people think are poorly, is poorly managed currently. And I will certainly pause to note, hey, Geico's a big business, Ted and Totter investment analyst, Berkshire's a lot, lot more than those. So, you know, anybody can find one bad investment out of 100, but those are two pretty high profile examples that jumped right out to me. So my question to you would be, do you think Berkshire in its current form is doing a good job with incentives, or do you think there might be, hey, maybe it's because they're

older, maybe it's a lot of other reasons, but maybe they're not quite eating their own cooking on that anymore. I'll take a roundabout way at answering this, which is I think this is my favorite, this is my favorite part of the book overall, but in the GEICO chapter in particular, this is one of the topics where telematics and competing with progressive, where, as you were just saying before, just reading any year offhand without knowledge for what was said previously or what would be said later on would still be insightful. But when you sit down and look at what they've said over a period of, I believe it was first talked about in 2012 or 2013 at the meetings, you really see the sense for how it in some way snowballed and how, you know, they were effectively

wrong, which I think gets to, it gets to one of the, you know, for lack of a better terms, problems that they may or may not deal with, which is that if Warren goes out and talks about something publicly in a certain way, I'm not sure how much it ties the hands of the manager's running a given business when that happens, you would think it's probably more a reflection of the conversations that he's had that are generally agreed upon. But maybe that's not the case. Maybe it's more of his opinion that he's sharing publicly. And who knows how much that ties their hands if that happens. If that has happened in the case of telematics, you know, especially given some of the things that Ajit has said in the more recent years, it's created a sustained and

really significant problem that they, you know, obviously are still working to try to get at today. So in that case, you know, it certainly hasn't worked well. In terms of some of the other businesses, I mean, obviously we don't have, we don't have a ton of insight into how the managers are compensated outside of what they lay out, you know, very clearly in terms of the general structure of the compensation systems. You know, I would think those are pretty reasonably structured, but who knows how, you know, those things probably do need to be rethought in a certain way in terms of how they used to apply, like, kind of like cost to capital hits to reinvestment in those businesses or for inorganic investments, you know, maybe that should be rethought relative to

the opportunity set that headquarters had 25 years ago versus the opportunities that headquarters has today, which I would think they have done to some extent. Let me give you one that is a complete rounding areas of the business, but one that I've really, I've spent a lot of time on QSRs recently, and I hope to have more to say on all pieces of yet another value blog on QSRs, you know, the premium public and podcast side in the near future. But one that I've been thinking about that comes to time when you say Dairy Queen, right? They have owned Dairy Queen for a long time. I think they bought it in the 90s. I can't remember. But, you know, Dairy Queen, I think has done well for them, right?

It's franchised. It's spewed up a ton of cash. I would bet that that system has done great for them. But I would also say when I think about Dairy Queen, I mean, it is one of the things I put about on QSRs is I can't find an example of a national scaled QSR burger chicken or pizza shop that's failed since kind of the 70s. And one of the few counter examples we were like, hey, Dairy Queen might not have failed, but it's like on the verge. And I wonder if the Berkshire incentive, which really encourage all cash flow comes back. And I think kind of encourages like not really a lot of growth investments, experimentation, like a lot sleepier. I wonder if that's really failed Dairy Queen because, you know, I think that's a brand ice cream

burgers. I've got very fond memories over the summers. I think that's a brand that could have been a little bigger. And I don't know. I'm not, I haven't seen like the financial and Dairy Queen, but that's just one that my gut is telling me the incentive system might have gotten a little misaligned over the longer term. It might have encouraged shirts from fast flow, but over the longer term. I'll pause there. No, I know. I think that's a very fair point. I think the nature of how, And again, the things that they break down, like the compensation agreements, the nature of how they've approached a lot of these investments, obviously the wholly owned businesses. I think the default is to structure it in a way that if a manager does not have a very high degree of confidence that something is going to generate at least a reasonable, you know, incremental return on capital, that the default should be to return it to headquarters. And I think they've structured compensation systems in that way.

And, you know, I certainly think that that can show up, especially over a period of years or decades at times as under investment on something that needs to be tweaked in a certain way. You know, the pushback might also be that Dairy Queen sells, has a menu or a collection of products that position it somewhat poorly. I guess they could have tried to, you know, try to reposition that, which they have to some extent, right? I think they've certainly, at least in the marketing I've seen, they've shied away a little bit more from the, blizzard first approach to marketing to more of a whole meal type of a menu, right? But it certainly doesn't seem to fit with where a lot of the growth has been in QSRs or fast casuals over the past decade or so. So maybe there's just an inherent problem there as well, but could they have invested

and found a way out of that? I certainly think the risk is in the Berkshire approach to underinvest as opposed to over-invest, especially in situations that have, you know, iffy or futures. And Derek Queen's one, and look, I would throw Seas Candy. Seas Candy has done fantastic. It's obviously the one they quote all the time, their shift to better investing. But I would also say, hey, C's, it's a great brand, it's an airport. I do wonder if they had been a little bit more aggressive in opening boxes and stuff.

If you could be talking about that, again, these aren't Facebook or Google or meta, but, you know, if the business was 2X as big, and it's just one thing that jumped out to me. Let me ask one more that kind of jumps out, because when we talk about underinvesting, one thing I think about a lot as casinos, because a casino is a license for it money, and I think a lot of casino owners have traditionally underinvested in CAPX because they can make a lot of money, whereas if they would spend a little bit more in growth, capex, I think the returns would have been better, and they just, like, were so risk-averse and so collecting money. When you read the thing, obviously, I think particularly Charlie, had a little bit of distaste on an

ethical level for gambling. But when you think about casinos, borderline license to put money, protected monopolies now, a lot of politics, you're really worried about the town over getting a casino license. But I don't think Charlie and Warren ever made an investment in casino. Does that surprise you just given kind of the high return than capital, protected nature, probably less cyclicality? Or do you think them putting up an ethical guardrail there makes sense? You know, I think it, again, I think it goes back to what I said before.

I think they have a certain, and they talk. talked about this most notably with tobacco businesses where that was the other one right when i said casinos i almost said tobacco as well they had the example of the private company where they could have done a deal that they basically thought was a cinch and they walked out of the meeting together and you know as the story goes they walked out of the meeting together and they decided not to do it but as warren has explained to other meetings you know they also own mclean which is a distributor to see stores or they own retailers that sell cigarettes and you know you can you can discuss what's the distinction between those two activities at the end of the day?

And I think Warren's answer has been, I'm not totally sure, but I do see a distinction between the two. And we kind of decided to draw a line for ourselves for what we're comfortable investing in. Does that surprise you? Because especially Warren is a capitalist. I mean, I've heard people who, I'm sure you might partly agree and you can disagree, tell me if I'm wrong. Warren comes across all shocks.

And I think he is ethical. But I've also heard people be like, dude, that man would, especially in his younger day, he would have shanked his mom for a nickel, you know? Does it surprise you that he put up those ethical guardrails when he seems like such an economically rational actor? Or do you think there is a degree of he's underwriting, hey, there's an ethical, like, terminal zero downside risk that I can't underwriting. That's why I'm avoiding.

So I guess I'm asking, are you surprised? And do you think his rejection is ethics or there's actually like some deep tail risk that he's implicitly rejecting? Yeah, maybe I'm a little bit more in the, maybe people would say I've been a little more believing of the kind of Ashuk's nature of at all. But again, I guess timing would be very relevant here, right? And you're talking about things that he may or may not been willing to do in the mid-50s versus things he may or may not have been willing to do in, you know, the mid-90s or in the mid-2010s. I would not be surprised if there has been some change in that regard, depending on how attractive an investment opportunity is, right, and how large it was. But I do think that there's reason to believe that they've had a certain, you know, way of thinking about the ethics of these kind of questions.

And there's lines that they were not comfortable crossing. I would say that I think that's probably closer to the truth than something else. Have they invested in an alcohol company? I can't remember. They owned Guinness at one point. And Diageo, if they were not the same company. They certainly owned Guinness. one point. Okay. So they, I mean, alcohol is more socially acceptable, especially in the 90s,

but I was just trying to think of other sin industries that they may have invested in. Obviously, I don't think they've done anything in guns. Maybe they did some stuff in defense. But yeah, okay. Yeah. A reminder that today's podcast is sponsored by FinTool.com, the chat GPT for SEC filings and earnings transcripts. Just ask your question, and FinTool will pull the best answer from the relevant documents, whether it's a snippet from an earnings call or a key point from a filing. If you're an analyst or portfolio manager, try FinTool today at finTool.com and take your research to the next level. That's fintool.com. All right.

So we talked to get back on track. We talked about how you read all 30 meetings in a row. And we talked about how I was asking you for kind of what you picked up when you did that. What do you find the biggest changes are from Buffett in the 90s? And remember, he's talking to a room of 500 people in the 90s versus 2015. He's talking to a 30,000, 50,000 person stadium. But what do you find the biggest difference are that kind of changes over the 20 to 30 years? Yeah, it's not as prominent in the book because I purposely wrote this as a business and investing book.

I mean, as you said, it's already close to 500 pages as it is. But I left out everything that was of the life advice. You know, there's a little bit of political stuff that comes in on the utilities and, you know, where that directly plays a role in terms of, you know, wind energy and things. like that, but it's really focused on the business side of that all. But that is certainly one of the bigger things that happened at the meeting over time is the topics shifted more towards the life advice, you know, things about taxes, things about politics, things about macro, those became a lot more prominent. I think that's more questioner driven, right? It's 30,

in the 90s, it would be like you and me as Buffett, like this man is a god, I'm getting a chance to go 50% it, I get me, like, we would have been asking, hey, what are you buying right now? And then by the 2010s, he's Uncle Warren and, you know, I think that's more questioners than him driven, but you can tell me if you're... Oh, absolutely. Absolutely. And again, like when you start, you know, Andrew Ross Sorkin and Becky are up there asking questions. Like, there is a certain thing that they think is interesting to the audience, obviously based on the emails that they were receiving from people asking questions that certainly skewed the conversation in a way that was just slightly different

then, again, what it would have been if it was you and I in the 90s going there and asking questions. The other thing that Warren started to do, particularly in the last five years or so, is he started having these kind of longer introductions where he kind of set the tone in the meeting or at least had a topic that he wanted to discuss that for one of them, I think, ran for, you know, close to an hour. So that's certainly limited some of the questioning and the broader topics I could get discussed. So I think that's probably the most prominent way that it's changed. And I also think they didn't do this a ton in the early year for my recollection, but they also obviously became more reticent to specifically,

at least Warren did, to specifically talk about certain people or businesses because they recognized the press of the audience once it was online. You know, I am thinking, Charlie, in this new, we're talking January, 10th, and it's been, there's plenty of articles and stuff. Over the past two months, it's been interesting to see a lot of businesses go and try and curry favor with the new administration. And I am like Charlie, if he was still alive, I think it would be really interesting to get his commentary on like, hey, you own Berkshire, which has a lot of, you know, a lot of regulatory political connections. I wonder if Charlie would be able, because I think

there's a lot of things he would like and a lot of things he would very much dislike. And I wonder if Charlie would be able to filter himself or if Charlie would just be out there making a mess for Berkshire nonstop because I kind of think it would be the latter but man I miss Charlie yeah me too let me um okay this is page 439 can you remember it by heart let me get my textbook out no I cannot remember it by heart this was I think the most interesting quote to me when I was reading it's just like

oh incredibly insightful and I'm not sure if you was right or wrong so let me pull it up actually So, 439, and it's Buffett talking about the internet. And he says, hey, the internet is more likely to reduce the profitability of American business than improve it. And he talks about how the internet will likely improve productivity, but he thinks it will reduce profitability. And in the long run, he will, it is likely to make American businesses worth less. And I am talking from 2025, 25 years later, a lot has happened. But I thought that insight was particularly interesting, and obviously he saw, I think when you see that, you can see he sees what's coming for newsprint, probably retail.

I mean, two years later, I think he buys the Amazon high-yield bond. So he probably sees it's not going to be great for retail, probably media, you know, it's not lost to me that he's got a deep history with capital cities and everything. And I don't think he ever buys into a media company again. So I will actually paramounts a couple of years ago, but you can see. he sees what's coming. That's interesting. But on the other hand, I think he sees it from an old economy perspective. And like you and I are talking here.

And I love him when people quote, oh, the Buffett Indicator is like, okay, yeah, stock trade for a lot more than GDP. Like, we're sitting here and I'd say American businesses are worth way more than they've ever been. We've got the best series of companies ever. So he's been wrong on that aspect, I think. But that quote was so insightful and maybe so wrong. I just, people can go read it page 439, as I mentioned, but I just love that. your thoughts on everything I laid out there. Yeah, I, you know, I think I tweeted that one a couple months ago and the reaction to it

to were, uh, were vigorous. And, you know, I don't, I have mixed feelings on the answer. I think the last part you just said, obviously, it would call into question some of the conclusions. I also look at a business like, like Nike and think about, you know, their distribution today versus what their distribution was like in a pre-internet era. And there's obviously certain benefits. is associated with that. There's also very significant changes in terms of how their brand is

perceived and their ability to basically segment the market and where people see it and how often they see it. And I think some of those things are very real. And obviously from a competitive perspective, you know, the ability of a brand like On to basically come out of nowhere and have a very significant presence and to sell largely, you know, D to C. It's a different world in that regard. So I think at the micro level, there's, and you named a few of the very prominent ones, there's certainly no question in my mind that it has become a lot more competitive. You know, the size of the opportunity has also changed in the process. So that's a very relevant consideration. But, you know, I think the answer's a bit of a mixed bag, but there

are obviously a handful of very, very large companies that have turned the internet into a very, very, or the internet, the term views broadly into a very, very attractive business for them. And that select group has driven the market quite a ways in the last decade plus. You know, the other thing I'd say about it, though, is, and again, this is the part of the book that I love the most, right? Because, and it's never a, you know, gotcha type of thing. It's thinking about two people who are significantly more intelligent than I am will ever be, think about kind of issues over time and other thoughts evolve. You know, a very prominent example is around the time that they owned IBM, Warren's, I think Warren explicitly mentioned IBM and Apple as well and basically said we understand that business and we have a better track on where it's going to be over time than we ever would for Apple.

And Charlie also said, you know, we just, we would never have the confidence of where Apple is going to be at in 10 or 15 years. That's comparable to the confidence we have on BNSF. And I think that was in 2012 or 2013, you know, and fast forward, not too many years later. And it was at one point, what, a $175 billion position or something like that? I'm not sure what the actual peak was. But it was a very significant position for Berkshire. So, you know, I think they are willing to change their minds, but also in the context of, you know, trying to play the game that they want to play. And they're okay with other people getting rich around them doing things that they don't necessarily understand.

And like most things in life, it's not totally black or white, but I think you can see their kind of approach if you're willing to not be too demanding. That was a great answer. And I really like how you brought up the IBM and Apple example. I mean, people love to, I don't think people really did anymore, but he got mocked, but he was wrong. He sold and he learned and he bought Apple. I think it's kind of, let me sidetrack for a second. You mentioned Nike. I really liked your answer.

Do you think Nike is a better business today than it was 10 years ago and 20 years ago? I think it's a very hard question to answer for the reason that... I don't believe you have a position Nike, but you've written up multiple, multiple times on TSAOH, so I'm not like asking someone who hasn't done to work on it here. And, you know, the short summary of what I've written up to this point

and particularly preceding the CEO change was I my sense was the company had consistently been been caught over their skis on their financial guidance both revenues and margins was even crazier they were at one point saying they'd basically get the high teens even margins and they'd never been anywhere close to that outside of a blip during COVID which you know basically wasn't a real number for for all its purposes um and I think what became clear to me over time was not only was the company getting caught off sides on this financial guidance that they had consistently given over a period of years, the strategy was also changing to some extent, in some ways probably because they were trying their best to keep up with that financial

guidance. And I think now in hindsight, it's become a bit clear that they were leaning on D to C, or what they call Nike Direct, particularly the e-commerce portion of that business in a way that, and maybe I'm reading a little bit too much into my... own anecdotal experience as a consumer, but it basically became a promotions-driven way to kind of get the flywheel to spin. And to be fair, they've also said the same thing in terms of a push versus pool kind of model. And, you know, it's got them in a place now where the new CEO has come in. And I generally agree with what he has said so far, but returning these kind of the premium destinations, as he calls them, kind of closer to a full-price platform.

that's not 50-50 between promotion and kind of list price, that's going to be quite a challenge given what they've done for a period of time now. I still think it's an incredibly strong brand with, you know, when they have the distinction between kind of their base product and the premium product, I think they still compete incredibly well and they're standing in that business is very strong, but they've also become a very, very large business by playing to both ends of that, you know, both ends of that market. So again, it gets back to this idea of your ability to segment the messaging and the product and the perception of the product was probably a bit easier 20 years ago where if you put a bunch of product in a certain type of store in the

middle of the country, it would have been perceived very differently than whatever you were selling at, a flagship in New York City. So I think that part of it all has gotten messier. Obviously, there's, for Nike specifically, this has been an issue. There's been the brand messaging and what they stand for component of it all, which is a, which is a real thing. And that's, you know, part of the world that we live in today. And then again, the rise of some of these premium brands that they have a clear, clear understanding of where they're going after. And I think they have guard rails around where they'll play, which is something that's just harder for Nike to do, given the business that they've built, unless they're willing to get smaller, which is always an

option. So I think it's a kind of company that really does need someone at the top who has a very clear understanding of what the brand is how to get it better over time. And my early read would be that Elliott Hill is probably a very, very good person to be in that role. And without saying this too confidently, I would say he might be the anti-John Donahoe. So it's a very important step in my opinion. Yeah, I don't know enough to comment crazy intelligently. It just like, it strikes me 20 years ago. It seems like it would have been much, much harder to start a competing brand. I know Under Armour did, but, you know, as you mentioned on, there's plenty of brands. I think you're seeing a lot of superstars can go direct with their own brands now. But on the

other hand, like, you know, global super start and can continue to scale kind of in the same way, like UMG artists still sign with them and want that label like Nike, that's, it's that on like steroids times 10, like they've got LeBron, that's a national scale. No one else can offer kind of the degree of what they can. And I look at the stock market and I kind of pull up the multiples as you're talking, you know, 20 years ago, Nike was a 15 times P.E. business today. It's a 25 times P.E. business. And there's a lot of other stuff going on. But the stock market, saying it is a better business worth more today. I don't know if that's right or not, you know, it does seem to me, you and I, if we really got lucky, we could start a billion

dollar brand, Lulu, Allo, those are certainly competitors, tons of shoe brands. I like the footless shoes, all the crossfit shoes. Like, it's interesting. Anyway, yeah, it's really relevant to that point. And there's this great interview with Elliott Hill, which people can, I've tweeted about it. They can't remember the name of the podcast at the moment. But one of the things he says in there that's really, really stuck with me is, you know, 20 years ago, and you just said this basically, 20 years ago, the athletes, even the most well-known athletes in the world, kind of needed Nike to some extent to still be part of them building their brand throughout their life cycle as an athlete. And obviously, that can extend beyond that if you're, if you're Michael

Jordan or someone of that caliber. 20 years ago, they needed Nike. And he goes, you know, today, they effectively don't need us if for whatever reason they don't want to work with us. There's, there's reasons why Nike should still be a better position than anybody else to to win that relationship to the extent that they you know value it highly and this has been one of my other knocks on the company which I've been writing about for you know a couple years is I think they started to skimp a little bit on what they call their demand creation expense which is endorsements and other things go in there and I just I look at examples like like a tiger woods or Roger Federer and think you know the idea that the idea that

And some people can choose to leave, obviously. They can't control everything that happens. But the idea that those relationships would go away is something that you really can't, you really don't want to happen. And if anybody is positioned to not let that happen, it's Nike. And to the extent that that expense line is going down by a couple hundred bips over a period of years, I don't think that's a good thing. That's not where you want margin expansion to come from.

So it was one of kind of a handful of red flags at the company. that for me said, you know, change is needed here. I don't totally have my finger on the pulse of why that is. I think I have a better sense now that I did at that time. But, you know, I'm personally, I'm really, really happy to see that as of even three to six months ago publicly or at least reported publicly, Phil Knight was kind of defending John Donahoe and saying he was the right person for the job. And now the reporting is pretty clear that he was, he was responsible for the replacement. So I think it's a big step in the right direction. And I'll be curious to see how it goes from here.

These are big businesses, so it's tough to, like, over-emphasize one. But it does strike me like, okay, I get Roger Federer. He, all-time tennis great, still a big name. But, you know, five years from it, tennis is already moving on quickly. But I look at basketball, LeBron James, Kevin Ray, and a few of these guys, they get lifetime shoe deals with Nike when they're big, big, big enough names, right? And Tiger Woods, like, even though he will probably never win another golf tournament, heck, he might not play in a lot more golf.

tournaments but he's still by far the biggest names like you hear it all the time in golf he's by far the biggest name and guess what he's going to be teeing off at the masters for the next 30 years right because they do that lifetime inclusion thing and it just it seems crazy to me that you wouldn't want tiger woods like i hear i don't follow golf very closely i hear more about tiger wood's son hitting a hole in one than i hear about anything else in golf it just seems crazy to me they didn't lock that up and again a business is much much beyond that but it's It's just one interesting thing. But it seems crazy.

Missed up on Nike's point, but it also speaks to the risk where Tiger Woods said, okay, cool. Nike probably offered him some dollar figure, and he was like, people follow me. I can go launch my own brand. And 20 years ago, he could not have launched his own brand, right? Despite being at the absolute peak of his power is the Tiger Slam, the distribution, the marketing, he could not have taken that all himself. Today, his Instagram can do it.

Yeah, I think the one other, I mean, to say something positive about Nike, and it's something that I saw in this industry, especially as someone who's, I owned Under Armour at one point, I can't remember exactly a period, but saw this kind of, as I watched more closely, there is an inventory component to this industry that is certainly a risk for Nike as well. They're going through a portion of that right now,

but there's an inventory component to this industry and a cash flow cycle component to this industry that does make it somewhat difficult for a brand to kind of become very mainstream, at least, in a relatively short period a time. You're running a very significant risk in doing so. Now, that said, maybe someone like On appreciates that and is willing to move a bit or a lot more slowly in terms of the kind of growth trajectory they're going to live to go on as we get to the years ahead. But that is a very

real component of this business that, in my mind, is one of the competitive advantages that Nike has at their scale that they can continue to lean on. Let's go back to Berkshire. Is there a industry or, let's stick industry, because I don't want to say a company. but is there an industry that Berkshire hasn't really invested in that after you read all these things, you're kind of surprised that they haven't made a move into? Huh. Well, I'd have to think of what they haven't invested in. I mean, I think some of the ones, and you talked about it with Paramount, I mean,

that's certainly a surprising one in hindsight to me, and who totally even knows what the investment thesis was, right? That's a surprising one to me in hindsight after knowing their history of cap cities and some of the things that they said around the time that they owned Disney and then sold and then some of the commentary they've had about basically the movie business or you know the media business some of the things they've said subsequently made it pretty clear that they probably wouldn't wouldn't touch that or ever want to invest there um so the idea that they bought paramount for me was kind of perplexing and honestly still is i don't have a sense for what that was

Buffett always jokes like Berkshire paid that one dividend in the 60s and he's like, I must have done it when I wasn't. I wonder if Paramount like, you know, Ted or Todd, the Buffett wasn't there when the investments were. Yeah. No, that makes so. I guess the two that kind of came to mind, but they're so small, but, you know, I always think about the, hey, what's, what's the, what's the oil man say to his kids on his deathbed? Don't sell the oil rights and I think both they bought TPL like in the 60s really early I'm a little surprised that they've never done anything in mineral rights but you know they're so big that what are they going to do by by Greenland I don't know like buy all the mineral rights that that's one that

jumped out to me is just I'm a little surprised they never got there but it's a niche and they've invested in so much as you said let's go to some yeah the other one real quick the other one I was thinking of is I mean they they've had they own a number of retailers generally speaking, very small ones and kind of nichey ones. They've owned, they own Walmart in size at one point in time. Obviously, Charlie's had a lot of involvement via Costco. That's a space that they obviously have a good understanding of the risk in as well, because retail has gone through a lot of changes over the decades. But it's one that seemed to have been kind of interest to them. And I'm somewhat surprised in some ways that they didn't eventually land on, I mean, Costco

so it would be a very prominent one, but even Walmart, which they, which they were buying and then had sold again. They mentioned the, yeah, the, the, I'm surprised one of those, they never found that they kind of wanted to stick with in a more long-term way than they have. But Walmart and Costco, right, it's off the coast, but Costco probably trades, as you and are talking, 50 times earnings, Walmart is 40 times earnings. Obviously, they would have bought them 10 years ago if they had known it. I think Costco, one of the reasons they never bought it is the little ethical line

and they were like, Charlie's on the board, he's involved. We don't need that picture. But when you, obviously they missed it and they've talked in high regards, but 10 years ago, when I think about Walmart, it's a 10 times price to earnings business and people were in Amazon, retail, all this sort of stuff is going to take over. Today it's a 40 times price earnings business and, you know, Walmart and Amazon go head to head in a lot of aspects on retail. Do you think Warren and Charlie thought Walmart Costco could or would be 50 times businesses?

Do you think they realized the degree of the moat as we went into the Internet age? Or do you think one of the reasons they didn't really lean into them in the aughts in the 2000 times is because they did think they were a secularly challenged and they were kind of wrong? Their answers may be different. I think correct me if I'm wrong. I think there's the one interviewer Charlie says explicitly he thinks Amazon has more to worry about from Costco than Costco has to worry about from Amazon, something along those lines. I think he thought very, very highly of Costco's position. And I think, you know, with the

benefit of hindsight that the acquisition they did of Inneville and what they've done in kind of big ticket appliances and things like that and furniture is a very intelligent application of e-commerce to Costco's business, which I don't believe, at least based on my understanding of something like the historic shareholder letters and things like that, I think they viewed the business a bit more broadly, if you call it, like the mid-2000s or late-2000s. And over time, I think they've kind of honed in their strategy, at least for the stuff that they do, not the, you know, kind of DoorDash type delivery. But for the stuff that they do, they've really honed in on kind of big-ticket appliances and things where their kind of white-cloth service can really be

a value ad. So I think they've intelligently kind of shifted that a little bit. And I maybe Charlie saw it to some extent that, you know, the core of their mode is going to be sustainable, even if Amazon gets, which they surely will continue to, right, gets even better at their delivery component of their business and the grocery component of their business. But I would think, I mean, obviously Charlie has said these type of things, right, in terms of he's perfectly fine holding Costco at basically whatever price it trades at. I guess we'd have to see how extreme that went before he'd change that conclusion, if at all. But my sense has been that maybe Warren hasn't been as much in line with that view.

But that's one of the funnier things from the meetings is when they've, you know, Charlie talks about Costco and Warren just kind of sits back. And I think at the one he says, now Charlie will do his, you know, his five minute, his five minute talk about Costco for all of you as he's done 10 times before. You know, he, but in his defense, obviously, for people who shopped there and see how busy it is all the time or look at the financial results. It's a company that has, you know, I think it was Sean from Ensemble Capital, who said something along the lines of Costco basically sells the, it allows kind of well-off people who are frugal to go spend money without worrying about it,

basically. And that's effectively what they sell and they do very, very good at it. Let me switch tracks completely. One thing that really interests me, this is at the start of the book, and maybe this is because I've been looking at a lot of cyclical. businesses and I feel a lot of cyclical businesses right now are priced like we're going into a depression, whereas a lot of other pieces of the market are the price like everything's going to be really good. But one thing that really jumped out to me is if you look at how,

you know, there's the famous quote, we'd rather a lumpy 15% return than a straight 10% return, right? And they talk about that a lot. They say, hey, I'm looking at one. This is from page 36. They say, we hate making investments where you can't make predictions on key variables, right? But then they talk about the lumpy business. And just a few pages after that, there's the story of, hey, we went and buy the, I think it's the Alabama Brick Company. And nobody else would buy it because it's cyclical and you can't predict. But we just looked and we said, bricks are going to be here forever.

And like, there's a lot of asset value there. And intellectually, I can bridge the two. But I just think it's really interesting when they talk about predictability. and no cyclical. And then they talk about buying these cyclical businesses. And you look at Buffett recently, 2007, he gets burned on Conoco Philips. Now he's buying Occidental. Yes, you can bridge it.

I'm not accusing them of being big hippercids. But it is interesting to look at the two. And I just wanted to raise it to you and kind of get your views on it. No, I think this is very closely related to what we were saying before in terms of the wholly own businesses particularly and their ability to control. if not directly, then through incentives, how capital is invested or pulled back on throughout the course of a cycle. And I think you see this in industries like manufactured housing where it's something that they invested in a very significant way at a time when

things are very, very ugly. I think they're very comfortable doing that, but I also think that they are concerned and maybe some of their experiences in oil companies, publicly traded oil companies speaks to this. I think they're also very concerned about the the aggressiveness or lack thereof on the capital allocation at different points throughout the cycle. And, you know, I think when it's in their own hands and they have the ability to to directly influence how those decisions are made, they might be a bit more comfortable than when they are relying on others to make those decisions. That would be my sense. And again, I think they, you know, it is structured in a way that the default is basically the capital comes back out, as opposed to being reinvested

for growth or whatever else, unless there's a very strong reason for doing so. And then that gives Warren tons of flexibility to do what he thinks is best. And I think that's just the way he probably likes it. But there's also probably some downsides of that, or certainly some downsides of that, too, in terms of Berkshire's evolution over decades. Yeah, no, it's a great point. And the other thing, this comes back to one of the first questions I asked. you but talking about hey under investments in the businesses and one thing that really jumped out to me is the the old Charlie quote where he says hey we hate businesses where every year they tell you there's a profit and there's no

cash flow you know and that jumped out to me but it's just interesting to think of that and hey every business it seems like they're trying to get all of the cash flow up and I wonder how much their their worries about adjusted EBIT on profitability with no cash behind it led them to suck everything up and guess what they probably did invest it better than many of these businesses. But again, it comes back to the underinvestment. And it is tough like the adjusted eBet, I quote, and then they're going and buying a bricklayer and they're buying railroads.

Like, yeah, there is some cash left over, but those guys make a lot of use of adjusted EBO too. Yeah, for sure. Let's, I want to end quickly with two things. Let's fast forward to the precedent day, right? I think a lot has been made of Buffett's view on the market currently. Right. And Buffett hasn't really made big new investments recently. He's been buying oxy off and down. But last year he starts selling his Apple position. He's been, I think he's been a net seller of stock for three or four years in a row. And I hear lots of debate, right? Some people will say, Buffett is the best market timer of all time. Maybe he doesn't call it exactly. But if you look at his big market calls, he's always raising cash before some shit hits the fan. And he's always deploying cash when things are, scary. And this time, you know, COVID, he doesn't really deploy much during COVID. I think

there's a lot of reasons and we can discuss him if you want, but he doesn't deploy much during COVID. And right after COVID, he basically starts taking the cash up. I've heard people say he's bearish. I've heard people say, look, man, he's 93 or something. Like he's trying to create a blank slate for his predecessor, uh, which goes against the, hey, he's buying BNSF and all these regulated industries to tie his predecessors hands up, which is kind of funny. But I'd love to just You read all these annual meetings, you're up to the temperature. What do you think Buffett's view on kind of the market these days is? My sense would be that it's not particularly great.

I don't know if I say that it's directly driving the actions or at least the scale of the actions across the board. I think with something like Apple, I haven't looked at the valuation when you started trimming or selling fairly aggressive. too closely, but it was a very, very large position that he may have looked at, you know, relative to something like long bonds or intermediate term bonds and thought, you know, I'm more comfortable taking the tax hit. I believe he explicitly touched on taxes at the meeting when he was asked about Apple, right? I think that may have been, in terms of, you know, changes to current tax structure. So I think that may have been a component at all. I think the other thing he'd say is we still own a lot of these businesses in terms of having, you know,

if you're measuring how much is invested, it's still a very, very significant percentage if you were looking at, you know, the overall asset base of Berkshire Hathaway. And, you know, it's part of it, him cleaning up to make it, you know, a blank slate for the next guys. Maybe that's true, particularly on Apple. I think some of the other, the other things my perception would be like a Coca-Cola or an AXP, I would think that those kind of just stay there in perpetuity. But I could be wrong on that. Last question I want to ask you. So obviously, I read the science of fitting.

You have one other insurer in your portfolio at this point. So you've got Berkshire and subs know this. I hope I'm not breaking news. You've got Markell in there. And Markell is a company I've followed off and on. And you just read, Markell obviously Bulls, I think Markell themselves, think of themselves as a mini Berkshire, right? Part of the reason they rose the prominence is they hosted the breakfast on the day after Berkshire, and I know for a fact they want to turn their annual meeting into

like a Berkshire type thing. So I guess I just want to ask on Merkel, and admitting I might be asking a bias witness, but what are the parallels you see to Berkshire? And what are the, you know, the critics say, hey, these guys have been claiming it for 20 years, but look at the returns. It's not exactly Berkshire's. What are the non-Berkshire pieces you see to it? Yeah, well, I think you could start with the insurance business. I think

there are portions of the insurance business at least on my assessment of what they look like that look like they're very high quality insurance operations. There are other components of the insurance business, particularly on the reinsurance side and then the messiness around ILS.

That is, I think the track record in the reinsurance book has has been less good for sure. And I think there's also just messiness around the ILS stuff and understanding what role they're going to play their long term and kind of, you know, whether or not they deserve to win in that portion of the business. So I guess that's a little bit of both there. You know, obviously Berkshire has had had pieces of the insurance business over time that were quite difficult, you know, most notably January for, I believe a decade or so after that deal was completed they had they had problems getting that kind of in place and turned around um you know

on the wholly owned businesses i think i wrote wrote this in one time in one of my markelle articles it's just funny to look back and think you know if you looked at berkshire when they were call it two decades into the wholly owned businesses game which is basically where markelle's at now they started in 2005 i believe it was a mf bakery um that would put you in the mid 90s or so for Berkshire. And I'd ask anybody listening to this to go up to Berkshire Hathaway Annual Report for 1995 and see what the collection of businesses that they were, that they owned inside of the wholly owned businesses look like. Point being, I think Markell's still early on this journey. I think the track record so far, adventures has been, for my perception, at least decent.

And I think they've probably learned a lot along the way. So that probably speaks to the component of it that's closest to Berkshire that I'm most optimistic about. over time, which is having somebody in charge who I think is trustworthy, I think is able, I think the team around him is able. And I think they have capital allocation, you know, options at their disposal that allow them to hopefully make intelligent decisions in a way that, you know, your average management team is, is more, you know, hamstrung by in terms of, you know, hosting investor days and saying, we're going to generate X billion dollars of free cash flow over the next five years. We're going to give 80% of it back to you to

repurched, you know, just like blanket statements and how they're going to allocate capital. And, you know, there's a certain rationale to why companies do these things. But I think a company like Markell, at the extent that they play their hand well, has meaningful advantages in terms of capital allocation that can add up in a very significant way. And if you layer that, you know, on top of a well-running, growing insurance business, then I think that'll work out pretty well over time. But we will see. Last question.

I think as well as Berkshire, probably, to be clear. Actual last question. I just think, and I think this is actually before the annual meetings, but Buffett and Berkshire have made a lot of money in banks over the years, and they haven't really gone into banks recently. I think they sold most of their banks, famously, Wells Fargo probably should have sold it in 2007, but they ended up selling in the late teens, early 2020s. But previously they did that, especially when they were smaller, banks were like among their

bread and butter. I think there's the famous story from Gabeli, I want to say, where like when Wells Fargo was distressed in the 90s, they were getting ready to assign an analyst to it. And then they saw it was in Buffett's portfolio. Like, you go do something else, analyst. Wells Fargo's clean. This is a buy. The reason I ask is, you and I have talked a lot about ally over the year. I know you're so long ally. I don't have a position currently. But I have thought and looked at banks a lot over the past two years. And I don't think Markell really owns any banks. And I'm just wondering, do you think investors are underestimating banks? Like Buffett took big positions in banks and made a lot of money. I think his track record in banks is unbelievable, actually. You know, that in the GS, in the financial

crisis, what's his big investments? Banks and banks press. And the savings loans, banks. And I understand we're not in the savings loans, but he's bought and held them for years. And most investors I talk to today, don't look at banks, don't consider banks, perhaps rightly. But I just wonder, you know, you're probably under-exposed to banks if you've only got an alley. Do you think investors are cutting, cutting this area off at the market rightly because of all the changes of that? Or do you think if you kind of study Buffett, maybe banks should be more up your alley? Yeah, I mean, I think my answer, and it speaks to having owned Wells Fargo at a point in time, own Bank of America at a point in time, which unlike most of my other bank

investments, that actually worked out reasonably well, but that was reflected mostly of, you know, really fortuitous timing. I think I bought in March or April 2020. So there were plenty of other things that could have bought it. It worked out well, too. Ally has been more troubling up to this point of the investment. And I, you know, I think owning it and watching it closely as a result has really taught me. And obviously, it's a bit of a smaller bank. and they're less diversified than some of the larger banks or by a white margin for the larger banks. You know, it's really taught me about how the challenges that they navigate throughout the course of the cycle

and how their decision making, you know, it doesn't need to be good 90% of the time. It needs to be good like 100% of the time or they're putting the business potentially at risk. And, you know, that's been really apparent. And as they've gone through a management change and now kind of tweak the strategy in terms of where they want to play on the credit side, I think there's probably a lot of logic to support that decision, but it speaks to how difficult it is to kind of switch what they were into something that kind of could be more broad and more diversified and potentially serve customers in other ways in-house.

So a point being in saying that is that I think it's a fairly difficult business. And to the extent that you're going to own a bank, you need to be in a business with someone that you really, really trust. and it's a hard business for that because it's very difficult to get your arms around what the actual exposures are at different points in time, right? I mean, it's very different than owning Nike or owning some retailer where you can always look at the balance sheet and have some sense for what the inventory risk, whatever it may be. That's much, much harder to do with the bank. I mean, I remember going back at one point in time and reading Countrywide's end report from whatever the last year, would have been in 2007. And with the benefit of hindsight, I was like, I really don't think

I can even identify now, like, what here would have foretold the problems that were coming. So maybe that's just a lack of knowledge on my, or it certainly is a lack of knowledge on my end, but also there just wasn't the indications there that someone could kind of even see it then. So maybe it's just more difficult, which might suggest that the prices are lower and for the ones that work out, you're going to get a bit of that reflexivity on the capital returns, and they'll work wonderfully. So, you know, that's kind of the two sides of the coin that you get on something like this. I'm hoping Ally is going to be like that. And I think they have certain things that, particularly on the deposit side, that make them potentially well positioned

to kind of go down that path. But we'll see. It's certainly not the easiest thing for me to own, which is kind of reflected in position sizing versus some of the other holdings. No, it's true. Like, your countrywide thing, I instantly pulled up their 10K and I want to do this, but I want to do exactly what you did. I might even steal it for a blog post, but it's a true. Like, it reminds me of NYC, not First Republic, because First Republic, it was very clear. You could read their financial statements and see that they, you know, if you mark to market

their book, they were way negative. But it reminds me of NYCB, which famously had issues recently where they were making New York regulated, New York rent regulated loans. And they never had a loss in 30 years. And the bank basically blew up on them. And I still don't believe they've really had a loss. But it became increasingly clear that because of some, in my opinion, very poor regulations, all this other stuff, that the loans were going to be way underwater when they came due. Right. So and I wrote and bought a little bit. And then I had a bunch of bank expert be like, dude, you've got to like kind of look at where this is going. But if you looked at their 30 year history,

you would have been like, wait, you're talking about them blowing up on loans that are like well covered right now that they've literally never experienced a loss on. And you kind of did the math of basically what they were having was 10% expense growth with no revenue growth. And you do that math for two more years and like, oh, yeah, these loans aren't completely underwater. But it shows how hard banking is. But at the same time, like I think what Buffett saw and maybe this is something we can

incorporate is it strikes me well as far as advisory the savings and loans crisis. Bank of American GSC buys during the global financial crisis, if you can buy a good bank below tangible book value during a crisis, it's probably worth more than tangible book value. And then you can just let that compound for a very, very long time because they earn the book value and either they reinvest it at hopefully decent rates or they pay it out. So maybe that's kind of the identity. Anyway, Alice, go ahead, go ahead. No, I was thinking another example that comes to mind from that period, similar to country-wise,

I remember looking at Moody's at one point in time. And in that case, you could, if you looked at their ratings business, you could track the mix of business moving more and more to structured products over time. So in that case, you would have had some indication. Of course, then you needed to understand what structured products were and why that may or may not have been something that was relevant to any other, you know, broader view about those businesses. I just think it's very challenging in terms of being a generalist is something that you can do in a lot of places. And if we're talking about owning something over a long period of time, you can probably get away with not having a ton of deep industry knowledge. You can kind of piece it together as you go. Banking is one where particularly if you're someone who's susceptible to getting shook and out when things go down a lot or things start getting scary,

That's going to be a very difficult game to play, as you and I both know from watching how things have worked out even over a period of like five years, let alone 25 years. No, you say if you're going to get shaken out, but then the counter is, in banking, like, it's the one industry where a panic can actually destroy you because as you saw with a lot of these guys, you're your deposit start fleeing, right? Whereas in any other industry, if you've underwritten it well and you, you can't destroy, you probably can't destroy it with a banking run, right? Like you and I go create a panic in Nike stock. It's not like customers stop buying Nike's because, you know, like the Nike warranty isn't there or something. So like banking is one of the very few industries where a true panic can be that self-actualizing cycle where you start a panic and that actually does cause the run on a make. A reminder that today's podcast is sponsored by FinTool.com. The chat GPT for SEC filings and earnings transcripts.

Just ask your question and FinTool will pull the best. answer from the relevant documents, whether it's a snippet from an earnings call or a key point from a filing. If you're an analyst or portfolio manager, try FinTool today at finTool.com and take your research to the next level. That's fintool.com. Any thoughts you want to have? We've been over an hour with some great. Any thoughts you want to wrap this up or anything? Can I ask you one question before we go or no? Yeah. Yeah. What are you, and I should say this. I wrote up Academy Sports and Outdoors recently. I'm writing up, I guess it'll be as of last week. I wrote up Dick's sporting goods as well, which I think ties in his whole Nike and on,

Nike and on, you know, business evolution. And honestly, it hits a lot closer to home, having now looked at these businesses. But I know you've looked at Academy as well, which people should go read your write-ups if they have not, because they're very, very good. But I'd be curious how you, how you're thinking about either Academy specifically or how that space is kind of evolving. Nike's kind of evolving, you know, their strategy a little bit to move back towards some of these wholesale partners? How do you think about that space? And is it increasingly interesting to you or less so? No, to be honest, it's less so. So Academy's old CEO was really good. And then I don't follow it as closely as I used to, but they were dramatically

missing same store sales. And like my thought on Academy was, you know, as I'm sure you know, and Dick's to a lesser extent, there's a lot of stuff where, hey, you and I, we know our sizes. we can just order but there's a lot of stuff where you want to go feel it and especially like academy i love hey you've got a kid you want to have them try it like hey it's a day where you go and try and they try 15 different you know baseball shoes and everything so i thought there was a real reason a lot of the stuff they sell is much higher um hires of transport so there's a real reason for buy online pickup in store but then over time i was kind of like look i started buying it because i thought there was some white space for boxes and i thought the the returns on boxes

initially were good, but then once they kind of started more and the COVID boom really came out, I was like, oh, are these going to be good or returns on boxes? And retail's a tricky game, man. I came to see a lot of retailers. It's just a very tricky game. They go bankrupt fast, and I just kind of thought my edge and the returns were better elsewhere. So that's kind of where I landed, but I'd be happy to be wrong. I'd love the Academy guys to do great, but they lost the legendary CEO, I kind of came to view it as, I thought it was low moody, but not no mody, and I kind of started thinking maybe this is really low moody. You know, it's one of those businesses.

Academy, it solves up for 10 years, and then they get a legendary CEO and a COVID boom, and they grow great, and then the legendary CEO goes, and the COVID boom goes, and the returns just kind of started trending towards Meg again, and I was like, oh, that story, I've seen that a few times, that story seems tough. Do you disagree? I don't believe you have a position, because I remember reading your write-up. I think you were kind of like, look, this is interesting, but I need a lot of questions the answer if I remember correctly.

Yeah, no, I generally agree with that. I mean, there's a couple things that come to mind. First one is there's very few instances you're going to find where a company goes public in late in the year. And then they went public at a $1.1 billion valuation. And then the next year, I think adjusted net income was north of $700 million. You don't see that every day, which speaks to the COVID boom. I think there were some shipping companies that went public like kind of right around.

COVID and then the next year they were earning like their whole market cap but yeah yeah that's nice when that happens but yeah to your point it's you know it's it's and I see this in in terms of dollar general and dollar tree and when you own a retailer and and comps are underperforming peers or the market or whatever it may be you know it's you need to you have to have a good reason for why that's happening right or especially if it continues for a sustained same sustained amount of time and and those can be very tough you know I think there's a as I'm as a as a I'm now kind of finishing up work on Dix. It's interesting to think their strategy strikes me a little bit more to kind of

the Home Depot post-financial crisis strategy of the unit growth has completely stopped. And they've now started to think more about, they call it House of Sport. And there's a great quote from, and Stack, who's the founder's son. It's a great quote where he says, basically go out and create the store that if they put it next to a Dick's sporting goods would kill the Dick Sporting's goods. Go make that store. And I think it costs a lot of money to build these for sure. And it'll take a long time to transition, even a significant percentage of the base to that model. But I think they've done things in the current stores as well to kind of build upon exactly what you were saying, right? There is a

component of this business that is a touch, field try, you know, golf clubs or, you know, a new baseball bat, a new glove. Like there is a component of that in this business. That's not as susceptible to e-commerce risk as some other businesses and there's also the component of you know i think academy would say the example of like it's hard to buy a canoe on amazon or whatever it may be or a kayak like some of those things are a bit different um and there is a certain component of you know timeliness of a purchase there may be times you need uh you know you need chingards for your kid to go play soccer in the games at 11 and it's 8 a m like you can't i can't tell you how often that that specific anecdote has come And then just on Dix, I mean, I love that they're leaning into the experimental, like, touch it piece.

It reminds me of Bass Pro Shops, right, where people will go, I'm going to Memphis in a few weeks and people like, we should go stay at the Bass Pro Shops pyramid, which is very unique. But, you know, people go, it's a full day when you go to a Bass Pro Shops. And maybe it's not a full day when you go to Dix. But to the extent you can get people in there, like, really wanting to experiment it and spend extra time, like, that is your mode against retail. So honestly, I'd probably prefer Dix at Academy. but I there's no gun to my head I don't have to have either yeah well the EPS chart for the EPS start for Dix's like just like Academy obviously I saw a massive tail one coming out of the pandemic and I think it was called a five-year period of right around $3 a share of earnings

and then shot up to today a you know call up 13 bucks or something so it's been quite a change I haven't looked at the Dix share price in a while though that it is done really well in what I think was a brutal environment for retailers last year yeah just like Academy, they had that stretch in the mid-2010s where things were, you know, going sideways at best and they were trying to find their path forward. It seems they've got that a little bit more now with the pandemic tail and also certainly helping. Well, we're way over now at this point. Alex, we're going to have to have you back on at some point because I know you mentioned Dollar Tree there. I know I know we got a lot of questions on Dollar Tree. I know that's your second or first biggest

position depending on the day these days. So we'll have to talk Dollar Tree. at some point in the future, but Alex Morris, there's going to be a link to, I'm going to try and hold it up. Nope, the YouTube still hasn't been picking up. But there it is, Alex Morris Buffett and my ear unscripted, 30-ish years of quotes. I thought it was a very cleverly organized book. I think people will get a great refresher course and everything that they've said at the annual meeting.

So, yeah, Adam, thanks for coming on. Looking forward to our Dollar Tree follow up at some point. Thanks for having me, as always. A quick disclaimer. Nothing on this podcast should be considered an investment. advice. Guests or the host may have positions in any of the stocks mentioned during this podcast. Please do your own work and consult a financial advisor. Thanks.