VALUE: After Hours (S02 E39): Business Code Breaking, The Big Con and Edward Chancellor, Market Wizards

Johnny HopkinsPodcastsLeave a Comment

In this episode of the VALUE: After Hours Podcast, Taylor, Brewster, and Carlisle chat about:

  • Business Code Breaking
  • The Big Con
  • Allergic To Hype
  • Value Hacking
  • Rogan’s Spotify Fiasco And Guerrilla Marketing
  • Apple Gimmicks
  • Edward Chancellor – Inflation And Value Investing
  • Trading Like Rembrandt’s
  • The Fine Line Between Hustle And Fraud
  • The Attraction Of Peloton
  • Chime’s Digital Bank Deposits
  • No More Mean Reversion
  • The Value Of Being Profitless
  • Liar’s Poker
  • Short-Sellers Are A Good Thing
  • YouTube Disruption

You can find out more about the VALUE: After Hours Podcast here – VALUE: After Hours Podcast. You can also listen to the podcast on your favorite podcast platforms here:

Apple Podcasts Logo Apple Podcasts

Breaker Logo Breaker

PodBean Logo PodBean

Overcast Logo Overcast


Pocket Casts Logo Pocket Casts

RadioPublic Logo RadioPublic

Anchor Logo Anchor

Spotify Logo Spotify

Stitcher Logo Stitcher

Google Podcasts Logo Google Podcasts

Full Transcript

Tobias: Hello, folks. It’s Tuesday 10:30 AM West Coast, 1:30 PM East Coast. If you’d like to listen to the podcast live, just go to The Acquirers Podcast YouTube channel, subscribe, you’ll get a notification. And then, you can come in and listen to all of this nonsense live. You can comment and we’ll ignore the comments. So– [laughs]

Bill: Yeah, and also–

Jake: At least one or two downvotes, please.

Bill: Yeah, if you downvote us, how about you leave a comment instead of just downvoting and running like a pansy?

Tobias: Mate, we’re going to get whole lot of downvotes for that. [laughs]

Jake: All right, well, don’t downvote then.

Bill: It’s fine.

Jake: I don’t care, upvote or downvote, it’s engagement, it all counts.

Bill: I can’t take a downvote with no comment. That’s weak sauce.

Tobias: Hey, hola Madrid. London, Ontario. Cali, checking in.

Bill: When I used to review people on Yelp–

Tobias: Dubai.

Bill: If I was talking shit, I would say exactly why.

Tobias: No, leave the downvote, no one cares. [laughs] [crosstalk]

Bill: [crosstalk] –800, that’d be hilarious. Doesn’t matter, you can’t take away nothing.

Tobias: It’s all engagement. [laughs] I literally don’t care. Go bananas. Just leave a comment too or not. Anything fun happening in the markets this week, gents?

Bill: I legit don’t really know. And I’m pretty happy that I have that to say.

Tobias: I can give you a little. So, for the folks who care about value, both of you, the left– or the 10 of you, folks who keep tuning in, we had a pretty good run from 1 September, died about a week ago. I don’t know what to say. It’s not big wave surfing anymore. It’s the flattest little lake anywhere and you’re out there with your boogie board, like two-foot water, like a three-year-old trying to catch a little wave, get that little wave.

Jake: Yeah, more like a bathtub.

Tobias: I slept nicely for about a week. Resting heart rate was pretty low, but spiking back again. [laughs]

Jake: Yeah, can we correlate your recovery scores–? [crosstalk]

Tobias: I’ve got it all on the Fitbit. I’ll leave my Fitbit to science when I pass away, they could–


Bill: This is what a value investor looked like in the middle of it.

Jake: Yeah, look at his– he’s getting two hours of sleep at night.

Tobias: What’s funny is Google already knows, man, because they can see your search history.

Jake: They’ve got the whole portfolio– [crosstalk]

Tobias: How to tie a noose.

Bill: Dude, that’s wild. Do you think they’re going to see your heart rate and your search history at the same time? I don’t know what they can do with it. Something.

Tobias: I’d rather confess to murder. [crosstalk] I’d like to confess to murder.

Jake: Yeah.

Bill: Hey, what’s up value stock, geek. Welcome to the show.

Tobias: You’re getting that notification before I am. That’s amazing.

Bill: I’m on the– [crosstalk]

Tobias: In the future. Yeah.

Bill: [crosstalk] –because I was off-center yet last week and y’all didn’t tell me, so now I have to do my own due diligence.

Jake: Am I in the center? I don’t even never look at that.

Tobias: Mate, you look great. That mustache is cutting the screen in half. It’s great.

Bill: Mustache is almost the entire picture. Anyway, I will take this intro. Welcome to Value After Hours. I am one of the hosts, Bill Brewster, along with my esteemed cohosts, Jake Taylor and Toby Carlisle. Jake, what you’re going to be talking about today.

Jake: I have a little veggie story segment on business codebreaking.

Tobias: Ooh.

Bill: Okay.

Tobias: I dig that.

Bill: I like that. Toby, what are you going to talk about?

Tobias: Edward Chancellor, one of my favorite authors wrote, Devil Take the Hindmost, which is one of my favorite books. I’ve read it probably five or six times and I’ve got about 300 of those little plastic flags for the whole book. It’s very hard to read it with that rustling the book. Has a little interview that’s come out. As I read through it, I thought this is all really, really old fashioned stuff, and I agree with every single thing that he says. So, I guess I’ve got really old fashioned views about the way that investing in the world works. So, we’re going to go through a few of those old fashioned views.

Bill: I think I might piggyback on you, Toby, because I was reading Market Wizards today, which is a very trader-focused book. But I think that stuff is really interesting to read. And I have enjoyed looking at markets through different lenses through time, so it was kind of fun to pick up. I went to bat for Puru. I have no idea if I should have on the Twitter machine or not. But he’s a nice guy. I just think he’s got a different style. Anyway, people are calling his returns fake news. So, he threw down a million-dollar bet and said, “Put your money where your mouth is fool.” So, nobody has.

I would advise people not to take that, that’s called information asymmetry. He’s got a lot more information than you do and it’s a million bucks.

Tobias: Well, it might be a million bucks more if you take that bet too.

Bill: That’s right. Well, the thing is, that’s a nice bluff. You just tell people a big number but you’ve got to be willing to put up. Somebody commented on my Twitter feed, they called the BDE, which I had to look up but it made me laugh. Anyway. Jake, why don’t you take– [crosstalk]

Liar’s Poker

Tobias: Just before you do, you guys know that story about Liar’s Poker where they used to play a lot at Salomon Brothers on the trading floor?

Bill: Great book.

Tobias: Yeah, great book. That’s where story comes from, where the guys were playing based on the numbers on a note that you hold in your hand.

Jake: We call them dollar bills here.

Bill: That’s true. [crosstalk] Yes. Note is Australian.

Tobias: Is it? I call them notes. All right. Dollar bills. Sorry, folks.

Bill: I mean, technically, notes– [crosstalk]

Jake: Federal Reserve notes.

Bill: [crosstalk] –the girls in first-grader. Wait, first grade is a little early. [crosstalk]

Tobias: Meriwether is the gun player of this game and Gutfreund who’s running the bank wants to come over and challenge him. And so he walks over and he says, “One hand, $1 million, no tears,” which means we’re playing for a million dollars, but if you lose, you can’t tell anybody. And so, Meriwether responds, “One hand, $10 million, no tears,” at which time Gutfreund says, “You’re nuts,” and walks away. It illustrates what a good trader Meriwether was because he was playing liar’s poker before they even started.

Bill: Yeah, I like that. It’s cool, if you are in the position that Puru’s in, saying a million bucks, really puts the decision to somebody. It’s like, “You really want to call me out on this, fine. Let’s do this.” It’s a very good, A, bluff, or B, way to get yourself a lot of money. Either way. I respect the move.

Tobias: I’d never do it.

Bill: What? Call them out.

Tobias: That’s LDE.

Bill: [laughs] I think it’s SDE, would be the opposite of BDE. But anyway.

Tobias: My L was limp. Let’s go, JT, before we go too far off the–

Bill: Yes, we’ve already derailed. Welcome, folks. That’s the best conversation you’re going to get. The rest is just crud.

Business Code Breaking

Jake: All right. Let’s go back to 1940 London, and you’re walking down the street and the siren goes off, and people nonchalantly start walking towards the tube entrances, and they go down there. And all of a sudden, the bombing starts. This is the bombing that Germany was doing of England at that time during World War II. It always amazed me how people have learned how to live with that, constant fear of death happening at any time.

But what’s interesting is, if you’ve seen the movie, The Imitation Game, some of this will be familiar, but the Germans had this coding machine that was called the Enigma machine. It was basically a keyboard that was connected to this scrambling unit. The scrambler unit had three separate rotors on it. Those positions of the rotors would tell how each letter would be coded and ciphered. The way the math worked out, there were three rotors to choose from a five, and each rotor had 26 different positions on it. So, right there, you get more than one million configurations that can happen. And then, there was a plug-board on the back of the Enigma machine that the wires would connect to with the keyboard and those had different positions that could be programmed. Before you knew it, it had 150 million, million, million different setups. And the rotors would change after every single letter. So, you would put it in there, the rotors would change the next one.

So, Alan Turing was this very, very famous early– call him a computer scientist, mathematician. He tried to crack the German code using this machine that he had created. What was difficult was that they were racing the clock as far as getting the signal, and then trying to decipher it before whatever the outcome was. Let’s say that German Navy had said like, “Go sink this ship,” they’re racing the clock to figure out, like which ship was in danger before the Germans were able to take the action. Every message would contain clues for the codebreakers to help them narrow down that 150, whatever that is, quadrillion permutations. So, the Germans to counter that would keep their messages short so that there were less words that could be keyed off of.

What the English would do is they would look for often weather reports because they would have words like fog or wind speed in them. And then, they could get those letters deciphered and then back into it and shrink down the available number of permutations. So, they would crack it on one day, they guess at it, and then for the rest of the day, they could decode it.

But then the next day, it was back to the grind and trying to decode it and basically save lives. One thing they would do is they would ask the Royal Air Force to drop mines into a certain harbor, so then they could pick up that message from the harbormaster that said either like the word ‘mine’ or ‘avoid’ or something like that, so they were sort of seeding what they could get out of the codes. To counter that in 1942, the Germans added a fourth wheel to the Enigma machine, which then exploded the permutations even further. What this did was it allowed the British to have advanced warnings of when the Luftwaffe was going to be attacking, and it ended up saving millions and millions of lives.

Now, what was interesting was that they had to be careful not to show their hand because then the Germans would escalate their encryption even further. There were rumors that Churchill actually allowed a really devastating raid to happen on Coventry because they were worried that the Germans were getting wise that the English were cracking the codes.

So, there’s a saying that, “Where there’s mystery, there’s margin.” Peter Thiel talks about monopolies and how they’re very quiet about it. They won’t tell you that they have a monopoly. If anything, they will reframe the whole discussion around the market size that they’re tackling into bigger buckets so that they look like a smaller portion of it, even though they’re maybe dominating that niche that they’re actually operating in. And maybe like a medium ROIC business that’s just cruising along at 10% to 20% maybe and avoiding competition for a really long stretch is sort of that, it seems suboptimal.

But from a game theory standpoint, maybe it’s exactly optimal, similar to the codebreakers not wanting to tip their hand that they had something special going on. That they were winning, and you want to be quiet about it when you’re winning. And maybe even you’re investing in moonshots, or maybe you have to go public, so that it feels like everyone can win because of this because it’s just two guys that are cashing all these checks.

You find some magic lamp that just prints money, you have to be careful what you do with that. You’ve got to be quiet, someone might want to take that away from you. So maybe you have to do things that appear very suboptimal to hide the fact that you are capable of winning and sort of breaking the business code. Guys, got any thoughts on that?

Tobias: Yeah, I just wanted to– there’s up on the screen now, Cryptonomicon. Thanks, Robinson, that a fantastic book by Neal Stephenson, one of my favorite authors. There’s a three-book series about breaking the Enigma code and all that followed on from the ground. It’s fictionalized, but it’s a fun read. Yeah, it’s fascinating that– they’d cracked it and then they had to pretend– if they knew where a convoy was going, they’d send out a spotter plane. So, they could say, “Well, the spotter saw the convoy before we bombed it. That’s how we came up with that information,” rather than “we cracked the code.”

Jake: Just showing up with the– Yeah.

Tobias: Yeah, I think it’s fascinating. The example that you gave is fascinating as well. I wonder if there are others that are like that, disguising how profitable they really are to avoid competition. Do you think it matters though, if you’re that entrenched? And what are you trying to avoid, regulation?

Jake: Yeah, I think regulation. High ROIC is going to attract competition eventually. So, you want to be quiet about it, maybe cloud it with some other expenditures, maybe even carry extra employees that you don’t even need. Maybe. Just to keep it down a little bit. You’re still going to be making plenty of money. Maybe you’re playing a little bit of a longer game as opposed to trying to win this very short timeframe at a maximum. It’s a longer optimization.

Bill: People say this is what Facebook’s doing, with a lot of their spend. They’re spending so much to hide how profitable they really are.

Jake: Could be.

Bill: Might be true, I don’t know. Thing that sucks for them is they can’t really sell their data center space because no one trusts them. It’d be nice if they could enter the Amazon, Microsoft, Google party, but you’re going to give you stuff to Facebook? Really? Okay.

Tobias: Well, why is Google any better?

Bill: Perception.

Tobias: Yeah. Okay.

Jake: [laughs]

Tobias: Yeah, no, I agree with that. 100%.

Bill: They have a brand of trust, and Facebook has a brand of not trust.

Tobias: I think Google’s just been very clever– you give enormous amounts of information to Google. They’ve got my Gmail. They know what I watch on YouTube. They know what I search. They own me.

Bill: Yeah, but they’re Google, right?

Jake: Your Fitbit?

Tobias: My Fitbit. Yeah, if they come to blackmail me, I’m gone. [laughs] I’ll just pay that ransom. I probably already do. Yes, so Google— But then, I don’t log into Facebook at all.

Bill: Yeah, I trust Google. I don’t trust Facebook in the same way, fundamentally. Doesn’t make any sense.

Tobias: I saw that Google wants to start charging for its meeting. It’s that thing that competes with Zoom and with Skype and everything else that’s out there. They want to start charging for it. I was like, “That’s early, isn’t it?” That’s bold. If people started using it as a default–

Bill: You’re talking about Google Meetup you said?

Tobias: Yeah, the whatever that Meet thing is that they have.

Bill: It’s odd, especially since Zoom can be worth $140 billion not charging anybody anything. I know they actually have revenue, folks. It’s a joke.

Jake: You’re just salty, because you’re losing your bet.

Bill: It doesn’t help.

Jake: [laughs]

Tobias: It’s not mark to market until what, February 2023, 2022?

Bill: Yeah. We’ve got a buddy that says that if it’s not a top-three priority for the big tech companies, you can sort of like swim in the ecosystem without them eating you. Tell you what, your valuation gets much bigger, you become a top-three priority quick.

Jake: Target on your back.

Bill: I mean $200 billion, that moves the needle for all these guys. So, how much more can you compound before they try to kill you? Now, people can be like, “Oh, they can’t kill Zoom.” [crosstalk]

Tobias: Revenue’s not that impressive though.

Bill: Yeah, that’s fair. Nobody cares about revenue though. Or SG&A anymore. It’s just valuation.

Tobias: Or SBC.

Bill: To be fair on the share base comp, not that– I would just say if I was running these companies, I would be doing the exact same thing.

Tobias: 100%. I’m not criticizing them doing it. I’m criticizing buying it, expecting that it doesn’t count.

Bill: I understand. I do think though sometimes my brain has criticized some of them for overinflated SG&A and overinflated share-based compensation. And then, I think, well, then again, if the market is going to reward you with this valuation for revenue growth, why the hell wouldn’t you just do everything you possibly can to pour gasoline on all your revenue growth? You’re selling options into a pretty rich market. I’d be doing the same thing, I’d be like nobody gives a shit if I generate any cash. Everybody’s willing to finance everything, I can issue shares like crazy and I can sell options and buy a mansion. Why would you not do that? It would be stupid not to do that.


The Value Of Being Profitless

Tobias: Well, that was the 1.0. Don’t turn a profit but because the moment you turn a profit, you can be value.

Jake: [crosstalk] –your valuation.

Tobias: Yeah. So, just stay profitless. And it’s all blue skies if you’re profitless.

Bill: Yeah, well, Gavin Baker said something once. He’s like, “The key is to know before the market does when my companies are going to re-rate off of a revenue multiple to earnings.”

Tobias: How would you know something like that?

Bill: Well, I think– and I might be misquoting who it was, I’m pretty sure it was him, but I think his point is like– first of all one he focuses on spaces that trade on revenue multiples. So, I think that you have a little bit more of a feel of where in a growth cycle people start to care and people stop to care. Second, if I am correct that it was him, he was in Fidelity, he has a sense of how institutional sales sell ideas to investors. You get plugged into that. You may know in story arcs when to bail or when not to. It’s the old like– I mean it’s not the old, but I think it’s somewhat similar to thinking like, okay, you buy in inning two, and you sell in inning six, and then whoever buys in inning seven is screwed. Maybe inning eight, nine, you can make some money.

Tobias: Yeah, I think I’m too old fashioned. I’m still trying to come up with valuations for these things and try to buy on the basis of the valuation. All that other stuff too.

Bill: Yeah. [crosstalk] –own banks.

Jake: Sucker bet.

Tobias: That other stuff is just too hard.

Chime’s Digital Bank Deposits

Bill: Dude, I was talking to somebody about– I forget who it was. It might have been [unintelligible [00:19:54] Capital, I forget. But about Chime, so the way that Chime works in fintech, Chime basically goes out and they sign up a bunch of consumer deposits for a bank. The bank is not the person that’s procuring the deposits. Chime’s a customer-facing app. They gather deposits. They say that you’re not charged any fees. Those deposits are not deposited in Chime’s business, they are deposited in a bank that allows Chime to do that. Chime has no bank charter. The way Chime earns money is they get paid a percentage of the credit card that you use. So, in a typical transaction, the bank makes a little bit, Chime skims a little of that.

In order to sort of use like as a marketing expense will take fronting risks, so they’ll pay your salary upfront, and two days later, the bank pays them back. So it’s a little bit of fronting risk. The bank behind Chime, what are they doing with the deposits? That’s my question. Because in a zero-rate world, it feels like if you don’t have any fees and you’re subscale, there’s a chance your credit risk is pretty interesting. I would love to dig into what that bank is doing with those deposits because there’s not that much reason to have deposits if you’re a bank, especially if you’re not paying any fees. You’re lending. What are you buying?

Tobias: Do you have the answer, like short-term money market?

Bill: I don’t. For now, you would drown. There’s not enough yield. That’s where I keep going with all these bank ideas, is eventually, I think that our interest rate policy just destroys small banks. I don’t see how you can actually comply with compliance and have the support functions that are necessary to run a bank and not have any yield out there. I might be really dumb on this and I might really be missing something. I guess, M&A, you can grow through, but like–

Tobias: How do the Japanese banks look these days?

Bill: I doubt they look good.

Tobias: European banks have been smashed to pieces, but Japan probably got there first.

Bill: I think McKenzie had it at like 10% of the banks make 80% of the profits, all in the US, for the most part. I don’t know.

Tobias: Good comment here. Barrons says in a zero-rate environment, banking industry will average a 13% return on equity, which is a little bit subnormal. S&P 500 average is 13.36. So, that’s a little bit– but not too bad. That’s about average.

Bill: Whatever you do, don’t buy Wells Fargo 2.7 times book. God forbid, they should only earn 13% on that.

Jake: So, what, you leverage up 30 times equity to get 13% ROE? ROA?

Bill: No, dude. Come on. It’s 1.3 and they’re 10 times levered. Get out of here with that 30 times leverage, you’re living in 2006.

Tobias: That’s true. That’s much better.

Jake: I was making a joke, Bill.

Bill: Well, don’t.

Tobias: You got the Fed back-stop there too. Nobody fails anymore either.

Bill: I thought for a brief moment you were drinking Bush because it’s at Waterloo that can look like a Bush. And if you were drinking a Bush with that stash, that would have been so sweet. Instead, it’s like a grape sparkling water, which leaves me wanting.

Jake: Very on-brand.

Tobias: Looks like it’s 11% to 12%. Okay, so we’re just correcting slightly there. Return in equity 11% to 12%, slightly subnormal, should trade at a discount to book. 11% of 13% times book, what’s that work out to? 85% or something like that?

Bill: Well, that should maybe a 11% in 0% world, sounds horrible.

Tobias: It’ll still try to discount the book, though because you can get the S&P 500 at 13.3, roughly.

Bill: That’s fine.

Tobias: Do you want to do your topic? Or do you want me to do mine?

Bill: You do yours.


The Big Con

Tobias: I might punt a little bit on Edward. We can talk about Edward in a moment. But your pitch reminded me about a book that I read called the Big Con, which is interesting. There was this period of time about 100 years ago, where there were these– So you know, the movie, The Sting, is about the big con, where basically there were different variations of it, the Wire, the Rag, and the idea was basically there were established stores, like it was literally a physical location. And there would be actors in this physical location. This is what their job was. They did this all day long. And so, the roper, so that would be– I might be traveling around on a train, sitting in first class, and I might talk to the gentleman beside me and he’s like, “I’ve got this great deal. I’ve got this great stock deal,” or, “I’ve got this great scam.”

Basically, the idea was, you would be pitched this idea that was basically a way to scam somebody else. And so, if that attracted you, if the idea of scamming another person was appealing to you, then you would come into this that– you were talking to the roper and then he would take you to the store. At the store, you’d be taken for what you had. But the whole time, you thought that you were in on the scam. That’s how they got you. That’s where that expression, “You can’t scam an honest man comes from,” like you have to be– sorry. Yeah, just got a little freeze at this.

There’s some that a gambling based, there’s some that the stock-based one. I think the stock based one, I’m going to confuse this a little bit because I read this book a little while ago, but the wire or the rag, I think it’s the Wire. So, basically, the Roper brings you into the brokerage, which is not a real brokerage. It’s entirely– and this is there all the time scamming people, so it’s like mahogany, and there are people running around and like suspenders and writing stuff on chalkboards and doing things like that.

They take you into the office, and they sit you down with the inside man. inside man is there all the time. This is what he does day in, day out. So, he’s very good at this. And he will say, “I’ve got this information that there’s going to be this play in this– there’s a pool being put together to manipulate this particular stock. And basically, I can’t participate because I’m connected. We’re going to need a front man, and it’s going to be you, you have to bring us some money.”

They would send them home to get money, then they’d come back with their 50 grand, which you could probably 10X it for 20 to 50 grand, 10X it for today. They’d come back, bring their money in. And somehow, these guys would take it from them. But then, there would be– you had to do these various different little tricks. So, the guy would lose all his money, because something would go wrong. And then, they’d say like that they offer him a way to get his money back. And some of these guys would come back over and over again–

Jake: More money.

Tobias: –not realizing that it was a scam. But then, if they figured out what was happening, there’d be some– The roper would accuse the inside man and the inside man would then do something pull out a gun and shoot the roper, and the roper would have a chicken bladder filled with blood in his mouth, bite down. So, all the blood would come out.

Jake: Have you not seen The Sting, Bill?

Bill: No.

Tobias: It’s very similar story to this day.

Jake: Oh, it’s a great movie, you’ve got to watch that. It’s so good.

Tobias: And so basically, the guy would think that he’s like now in– that the inside man would run with the mark, and they’d go to a hotel and now looks like we’re all going to go down for–

Bill: Oh, now he’s a fugitive?

Tobias: Yeah, now we’re all going down for attempted murder.

Jake: But he’s like, “You can’t go anywhere. You can’t go the police because now you’re caught up in all this stuff. You just have to completely walk away.”

Bill: That sucks. That would be a bad day.

Tobias: But then, they push the guy out and they tell, “Well, you’re going to meet me and you go to Chicago, and I’ll be in Chicago in two weeks.” And the guy just never turns up. But eventually you figure out you got scammed, but you’d be so embarrassed by the way that happened, you wouldn’t tell anybody. Or you’d think that you were implicated in a murder, and you wouldn’t want to tell anybody about it. So, you just get home. Nobody would ever tell anybody about it. That’s how they’re able to keep on going.

Jake: In The Sting, it was a horse racing operation with front running information, but, yes.

Tobias: That’s one of the classic examples of it. There are three. I just forget what the names of them. The rag and the wire. One is the stock market version of the horse racing one.

Bill: That’s interesting.

Tobias: I think it’s fascinating.

Bill: I would be no good at that.

Jake: [unintelligible [00:28:33] you’re going to be– [chuckles]

Bill: I know, I don’t think I’d be a good scammer. I can barely look at these freaking comments without cracking up. I just don’t have a good poker face. So, if I was playing fake shot or something like that, I wouldn’t be any good at that.

Tobias: If you weren’t any good at the scam, you’re the roper. You just travel around and you look for traveling salesmen. You just pitch them the story all the time. And you find someone who bites, and if the guy bites and you just take him and introduce him to the inside man, basically your job is done at that point. The inside man takes the money and gives you a cut of it.

Jake: This mustache is my Paul Newman Sting mustache.

Tobias: Yeah. That’s a great mustache.

Jake: [laughs] Probably won’t be here next week.

Tobias: Oh, really?

Jake: I’m getting a little over it.

Tobias: What a shame.

Bill: I’m not going to miss it. I’m not going to lie. I mean I respect it. I mostly respect it because I can’t grow one. Looking at the two of you just makes me feel really emasculated.

Jake: Oh, come on now. I can tell yours would be better than what I– [crosstalk]

Bill: I assure you I will grow this thing out for three weeks and you will be looking at like a 15-year-old boy. It is disgusting. It’s patchy, and it’s long, and it’s gross.

Value Hacking

Tobias: I think the interesting thing about the Big Con is that I see versions of it in the stock market all the time. I think Nikola is an example of the Big Con. Any entrepreneurial effort where they don’t yet have the prototype or whatever built, they’re still value hacking as they call it, trying to figure out how they’re going to make money.

Jake: Value hacking. That’s [chuckles]

Tobias: That’s what it’s called. If you haven’t figured out how you got to make money and you’ve raised a whole lot of money, you’re still basically at that stage where you’re using these techniques and it’s widely accepted, that’s okay in society to do that. It’s hard to go forward without people having some faith in what you’re doing. But I think as an investor, you need to be very, very careful about where you’re laying your bet down and knowing exactly what you’re doing. If you’re participating in one of those things, then you’ve got to know when you’re going to pull the ripcord and maybe you’ve got to watch revenue lines and things like that. I don’t know. That would have been hard to Nikola, 100 grand?

Bill: I still don’t think it’s a fraud. I don’t care what anybody says to me, if you bought into it, that’s on you.

Tobias: But when say fraud, like–

Bill: No, I understand. I understand they were misrepresenting technology. I get it. I mean, I do understand how it’s a fraud.

Tobias: It’s a very fine line. Fraud is a very strong word. Fraud has, you’re a lawyer, that’s theft with dishonesty. So, that’s very, very strong to say that something’s a fraud. I’m not necessarily saying, I mean, Nicola might be, but because they’re misrepresenting that they had a prototype, that they had some technology. I don’t know, I didn’t see that offering documents. I didn’t see what they were pitching to people. But you’d be a little bit nervous there, I’d be a little bit nervous.

Bill: I was reading Tubes recently. I’ve been doing a deep dive on the infrastructure of the internet. An interesting anecdote in that book is the founder of Equinox, when he was starting to get the very first interconnections– I’m going to mess up who he was talking to, but say he was talking to AT&T. He knew that once Sprint came into the building, AT&T would need to be there. But he also knew that there was no incentive until one of them came for all of them to come. So, like in the sales pitch, he was like, “Oh, well, AT&T is coming next week.” And then the guy from Sprint was like, “Oh, shit, I gotta sign up.” But AT&T was not coming.

Tobias: Until he went and said, “Hey, guess what, Sprint’s coming in next week?” Like, “Oh, we’re going to be there too.”

Bill: That’s right. And, and Home Depot was built on a similar lie. They couldn’t get the financing for the inventory. So, they went to the like all of their manufacturers and they said, “Fine, give us like two refrigerators, but thousands of boxes,” or whatever. So, when you went in, you had the perception of a full store, but it was really just empty boxes behind it. I think Ken Langone told that story on CNBC a little while ago, but when I heard it, I was like, “Oh, that is wild.”

The Fine Line Between Hustle And Fraud

Tobias: It’s a fine line between hustle and fraud. And I think that some of you need the hustle to get a lot of these things go, and I don’t necessarily have a problem with hustle at all. I think by the time you get to the public markets, you can’t be hustling anymore. You’ve got to have something there because people just can’t do the diligence. I don’t care if a VC walks into a store and sees a whole lot of boxes.

Bill: They could do the diligence. People don’t do the diligence.

Tobias: It’s too hard for me.

Bill: But I don’t disagree with you.

Tobias: An individual can’t go and diligence on Nikola.

Bill: That’s true, but when I see how many people– [crosstalk]

Jake: Then don’t buy it.

Tobias: Well, that’s it. That’s the answer, you can’t short it either.

Bill: [crosstalk] I’m in an index fund.

Tobias: Well, that’s a good point.

Bill: Yeah, I was told to give away my money and never think. And now you’re telling me that I have to think or negative consequences occur?

Tobias: Mere puffery, that’s the word.

Jake: [crosstalk] –very much.

Bill: You know what pisses me off, like something that legit pisses me off? Is people bitching about executive compensation and then investing in mutual or index funds. Who’s never going to vote against executive compensation? Your index fund. So, if you give away your right to vote, then you can’t bitch when it comes back and bites you in the ass. Oh, and by the way, who do we want to fix it in this scenario? The government, who no one votes for anyway, this is all insane. It’s an abdication of responsibility. And it’s upsetting. Anyway.

Short-Sellers Are A Good Thing

Tobias: I’ve got this comment up on the screen at the moment, but that’s why short-sellers are a good thing. Short-sellers are the guy’s going around making sure that these things don’t get much bigger than they already are. Hindenburg did the entire world service. I hope they made money out of it.

Bill: Dude, shoutout to the short-sellers. What’s up [unintelligible [00:34:22]? Thanks for listening.

Tobias: [laughs]

Bill: I like Mark. I don’t think Mark spends his time listening to us though. That’s okay, though.

Jake: This is my favorite part of Value After Hours is when Bill assumes that people who don’t listen are listening. [laughter]

Tobias: Everybody listens. Everybody takes time out of their day. Nothing gets done.

Bill: But the odd thing is there’s only– [crosstalk]

Jake: But he’s so earnest about it. It cracks me up. [laughs]

Bill: Well, I was thinking, this is actually like a sick thing. But last night, I’m like falling asleep and I was like, “I wonder how many of the Twitter accounts that say that they follow us is really just Ian Castle. And he’s just out there with all these alt accounts and burner accounts, just pumping up Value After Hours. And then I was like, but then how does he in between all the VPNs and all his burner accounts? How does he have time to do all the micro-cap stuff? But I know he’s doing all this. Thank you, Ian. That’s all I’m saying. Plus, he’s acting like Cory on here and he’s acting like Mike, he’s got those accounts, like Ian is a busy dude.

Tobias: We got lots of quality followers.

Bill: My man, the Corporate Raiders is really just Ian. That’s Ian’s radar off [crosstalk] go.

Jake: What if he was just an AI that was programmed to do this?

Bill: Yes. What if we actually are the people funding the AI that’s Ian.

Jake: He’s like Agent Smith in the Matrix.

Bill: I mean, I’m just saying we’re talking about fraud. No one can say it’s not true. You heard it on the interwebs. I’ll tell you what–

Jake: Are we going to talk Edward Chancellor at all, or is that not a thing?

Bill: I don’t know. [crosstalk]


Edward Chancellor – Inflation And Value Investing

Tobias: Edward Chancellor, I just pulled out a quote from– he’s done a recent interview.

Bill: [crosstalk] –man, that’s not how the show works.

Tobias: I’m going to throw it to you, mate.


Tobias: And this is something that– I put it to Cliff when he was on. He says he thinks that value stocks work if inflation picks up. I’ve got no idea about this. I’ve heard this a few times, inflation or interest rates or whatever, because value is short duration in the sense that they’re lower price to the cash flow. And so, the near-term cash flow is do a little bit better if you get higher inflation, it becomes more attractive, longer-term cash flows, P/E 50, whatever, becomes less attractive. Empirically, that doesn’t seem to be much support for that. So, Cliff Asness at AQR wrote about it. I talked to him about it when he was on the podcast. His guys, Tobias Moskowitz, all those guys who are full-blown rocket scientist geniuses looked at this stuff and couldn’t really find any connection.

Cliff made this throwaway comment though where– I said it appeals to me intuitively, but it upsets me that there’s no connection empirically. And Cliff said he had brute-forced it and he thought that he had found some connection and he was going to write it up but that paper hasn’t come out. And there’s another one that post hasn’t come out. And there’s another one that’s come out in the interim that didn’t deal with it. So, it’s either on the back burner or he’s forgotten about it or it’s going to come out in the future. I don’t know.

Jake: Cliff, get to [unintelligible [00:37:31]. We need that confirmation bias.

Tobias: Yeah, that’s what I do, all the stuff to collect all the confirmation bias.

Bill: When you said brute force, I was like, “Does this mean he data-mine this?” But Cliff would not. I’m not trying to get in a Cliff beef. I saw that stuff with him and Taleb. I’m not into that. I have no shit going on in my life. I’m not trying to have Cliff come at me.

Tobias: I like Cliff. I don’t disagree with anything he says. I don’t have any–

Bill: I was on Team Cliff. For the record, Cliff. I know you’re listening. I’m telling you, I was on your team.

Tobias: Evidently, we might have removed the connection might have broken up or something would have stood for the three of us. Now we can be honest.

Jake: That was Cliff.

Tobias: [chuckles] That’s the President’s kill switch. The President’s got an internet kill switch [crosstalk] hasn’t been used it.

Bill: Dude, I will tell you what’s crazy. You’re on dial-up, you need to sign up for Charter. Come on, man.

Tobias: I get the ADA cell or whatever it is asymmetric dial-up.

Bill: Yeah, that’s right. Yeah, that copper connection, get out of here–

Tobias: The technology is so good. Twisted pair is going to be around forever.

Bill: And now we’re now getting the things that upset me. Hang on.

Jake: Are we not broadcasting now?

Tobias: I think we’re back. We’re back.

Bill: Yeah, we’re back. Now, we’re back. You’re welcome for the technical expertise here.

Tobias: I don’t know what we missed, but do you some comment, Bill? [crosstalk]

Bill: No. I don’t even know if I’m going to do my topic. [crosstalk]

Tobias: I thought you didn’t have one. I thought you’re going to jump on Chancellor.

Bill: Oh, well, I’m sort of piggybacking on your topic.

Tobias: Well go, do that. We got time.


Allergic To Hype

Bill: There’s something that you said reminded me and I had been noodling on this lately. I have a visceral aversion to things that people love. Okay, like that is my predisposition. I don’t like things that are loved because I think that–

Tobias: The Grinch.

Jake: Because you don’t love yourself?

Bill: It could be, I don’t know. I’ve done a lot of work. I think I’ve come a long way in that. But there was a time. Yes, thank you for bringing up those dark days. Anyway, no, I just think that people tend to hype things that are liked a little bit too much. And that brings me to SAS, which is cost me a ton of money, not to just like jump on the SAS train. But one of my problems as an individual with SAS is let’s say I got a subscription to Gartner. And let’s say that I got access to all of the people in the industry. I have this predisposition to believe that everyone has an extremely strong motivated reason– like, it isn’t no one’s incentive to raise their hand and say, “Maybe the TAMs aren’t this big.” Or maybe this isn’t going to go as well as everybody said.

Right now, everybody is making so much money so fast and that, and we’re living in the middle of– and look, I would have said this shit, like, last year, too. So, I’m wrong. Don’t listen. But if you want to know who you’re listening to, this is how my brain works. We’re living in the middle of a time when a lot of things have been forced forward and a lot of the– I guess, like a lot of the TAM is actually realized and it enables people to even like further make–

Jake: Extrapolations.

Bill: -these prognostications. And I’m unclear that TAM has expanded whereas we’ve just found a different use or whatever. No one that I would be reading, or is getting clicks, like one of my friends is saying, he’s like, “Your podcast is doing pretty well. But it’s a value pod. What if it was a growth pod? Imagine how well you’d be doing?”

Tobias: We’d be doing a lot better. [chuckles] Yeah, like, my portfolio.

Bill: Yeah, shit ton of people would be tuning in. I don’t believe the stuff that I’m reading, and maybe that’s my own detriment. And it’s not as if I believe the turd pile necessarily, but I just think that there’s a lot less incentive for the hype cycle to get going. And I just don’t trust hype, fundamentally.

Tobias: Yeah, I’m allergic to it, too. I know what you’re talking about. I didn’t know exactly where you’re going. When you started that off, I thought you just didn’t like things that people liked. [laughs] But I’m with you. The valuation, I’m just not going to value stuff on– there’s an earnings power component to it, a yield component to it, and then there’s a growth component to it.

The level of your success over the last five years say, has been how much you trust and believe in the growth component. If I look back far enough over the data, and I know we’re in a brand-new world where nothing that happened prior to 2011 matters anymore. But I still think that, ultimately, you’re exchanging money for some cash flow. And it doesn’t matter how fast it grows, you can still pay too much for that. And the consequences are not that the thing collapses. I don’t think that for many of these names, they’re not going to collapse. What they are going to do, though, is bump sideways for a decade.

Bill: Yeah, maybe. I mean, I don’t know. Maybe they don’t. Maybe we’re wrong. And that’s possible, and we have been, but when you see Peloton release a big, hairy, audacious goal, first of all, I think that’s stupid. But second of all, whatever, of100 million, right? And people go nuts. Yeah, I mean, I agree. If they get to 100 million, it’s cheap. If they get to a billion, it’s even cheaper. If they get to four billion, it’s even cheaper.

Tobias: Uses?

Bill: Yeah. I love Peloton.

Jake: He said incredulously. [laughs]

Bill: I mean, I am a big time– [crosstalk]

Tobias: They’re going to sell him 100 million bucks and have 100 million subscriptions.

Bill: Look, I mean, you start going over the world, it’s not that big of a market share, objectively.

Jake: You’re giving me the TAM margin.

Bill: No.

Jake: Well, there are seven billion people on the face of the planet Earth. In a household, there can be four. There’s like 4.1 people per household, so we’re going to be 4.1 Pelotons per household.

Bill: No, let’s say, I think you’re just looking at the 100 million households.

Jake: The average income of those were people in the household.

Bill: That’s cool, right?

Jake: And you’re going to pay how much for a bike? The bike that doesn’t go anywhere?

Bill: They’re going to start to sell the bikes cheaper. The bikes is just a means to the–[crosstalk]

Jake: Some of these people don’t they have bikes that actually take them somewhere, much less the bike that takes them nowhere.

Bill: Look, they could take the Roku approach and just give the bike away for the software. I mean, that’s possible. But my point is, who gives a shit if they said that’s their goal? What do you think they’re going to do? You think the CEO is going to stand up on stage and be like, “Guys, that’s it. That was a heck of a run, folks. We have hit our peak. And that’s great.” No, that’s not how anything works in the world. Of course, he’s got to say something that the company and the employees motivated. What are you going to do? You got a $25 billion valuation on vaporware bait. I mean, not that it’s fake. I shouldn’t call it vaporware, but there’s so much air under that valuation. Of course, you have to hype it. And people are asking me what I think. What I think is that, of course, he said that. If you put that credence in that, I think you’re crazy. That’s what I think.

Trading Like Rembrandt’s

Jake: I think this is a good way to think about it, there’s a sliding scale on what equities can trade for. And they can sometimes they trade for the use-value, the cash flow creation. And sometimes they trade like Rembrandt’s and more about has the price been going up, and does someone else think that it’ll keep going up and then they want to keep that going. And it can slide back and forth from either side depending on the general mood. But at some point, it’s somewhere along this continuum, and we’re a little bit more towards the Rembrandt side of the world.

Tobias: Trading settings.

Jake: That’s about it. That’s another way of saying it.

Bill: Well, in case I haven’t been clear enough, I love Peloton. I use the app, I use it for ab work, I use the workouts at home. I get the value proposition. I also think it’s insane to put any faith in what they’re saying when it comes to big, hairy audacious goals. I’m sure Fords just start to be relevant again.

Tobias: It’s a little bit difficult to see what the world looks like I think post this little– I think this has been an unusual period. Lockdowns is an unusual thing. I hope that’s an unusual thing. We’re not looking back at the good old days, 10 years from now still locked down. I wonder how much of the things that are going on, or just people were like just extrapolating the very near term out to the horizon when there’s probably going to be a little bit of things going back to normal. Maybe not everything, maybe most people figured out they’re like working from home or they don’t like the commute or they’re like bedroom communities. I don’t know. There’s going to be a change but not as much as we’ve seen.

Bill: It’s what it seems to me. I mean, I don’t know. And I get the value proposition, but people also want to leave their homes.

The Attraction Of Peloton

Tobias: What’s the subscription for Peloton? Is it 30 bucks a month?

Bill: Yeah.

Tobias: That’s fat.

Bill: Dude, if you use it, it’s not that bad man.

Tobias: 30 bucks a month?

Bill: It’s not that bad. [crosstalk] –workouts.

Tobias: What do you pay for your field Netflix subscription, like 14?

Bill: Yeah, but that’s underpriced. That’s just consumer subsidies driving valuation.

Tobias: What if somebody comes up with the YouTube version– or it’s probably YouTube. Somebody sets up that their own channel where they’re just going to get on a bike and give you a live and then a recorded version of–

Bill: I like Peloton. I’m not leaving Peloton. They give me what I want and it’s a good product. I’m not shitting on the product, but I do agree with you that there’s a lot of ways for them to lose. That said, if they get the luxury part of that market, that’s worth a lot of money, but I don’t know what that’s worth. You want me to put a pinpoint valuation on it, and I’m going to pay what today? I thought it was rich at 7 billion.

Tobias: What’s the attraction? Because I don’t have one. I don’t use one. Is it because that they can see what you’re doing and they can give you a shout out and comment on what you’re doing? And you can compare yourself to everybody else in real time?

Bill: Yeah, I don’t even take the live classes. There’s– [crosstalk]

Tobias: Why don’t you just get a [crosstalk] YouTube? Why don’t you just find someone who’s doing it on YouTube and follow them?

Bill: I mean, psychologically, there’s something meaningful about the Peloton community for me is dumb as it sounds, it’s real. And I also think they have good classes. I like the personalities that they have. That said, I don’t think the personalities are where the value accrues. I mean, if they kick my boy to Toussaint off, I’d be pretty pissed.

Jake: [laughs]

Bill: At least judging from–

Tobias: He’ll just go and set up his own YouTube channel.

Bill: Yeah, this is the argument that everybody has. I don’t think it’s that easy.

Jake: The fact that you went male on the selection on this goes completely against everything I’ve heard about Peloton.

Tobias: [laughs]

Bill: No, he’s the best, man. I also like hip hop, so I can listen to his tracks.

Tobias: You get Instagram influences to jump on a bike and ride and shout out what they’re doing.

Bill: I don’t think it’s that easy to do. But I also invest in QVC, and that’s what people say about QVC. Why can’t Instagram influencers just do all this shit? I just don’t think it’s that easy.

Tobias: But QVC is different. QVC is in the business of content production, and they’re monetizing that content production really, really well. And I can stick it out of any number for– QVC as the source, it is hard to generate the content. And I get that peloton is generating the content. My question is whether– and I think that they’re probably doing a very good job making a lot of money, probably going to grow really quickly. It’s not worth $25 billion though.

Bill: I mean, like I said, I thought it was rich at seven.

Jake: Rates, bro.

Tobias: Well, that’s fair. Pull it all forward.

Jake: Pull it all forward.

Tobias: At 0%.

Bill: And they get about 100 million subs. You’ve got people at home in a pandemic. Okay, when are you going to get a bigger tailwind for that business? And now we’re going to grow up this base? This pulled forward a lot of years of growth. If you didn’t buy one by now, what you think like next year you’re going to be like, “Oh, I could go to the gym. But when I was stuck in home, I opted not to do this. But now that I have all these options, sure, I’ll sign up.” No, I don’t buy it.

Jake: Yeah. Extrapolation is very dangerous in the investment world.

Tobias: Used to be.

Bill: I mean, shit, if I was– [crosstalk]

Jake: Yeah, before we just cancelled reversion of– [crosstalk]

No More Mean Reversion

Tobias: Yeah, there’s no more mean reversion, I saw that. Mean reversion is gone for the last 15 years, I was surprised to learn.

Bill: I haven’t even looked at this stuff.

Jake: [crosstalk]

Bill: Yeah, look at this shit.

Jake: Interest rates.

Bill: Buybacks since March.

Tobias: If you got any questions, throw them in, we’re a little bit late for that.

Bill: Buybacks, since March.

Jake: Toby, can we go over a little bit– [crosstalk]

Bill: People [crosstalk] it today. This stock is going up today. That’s crazy. Then again, why wouldn’t it? Because the people that own it, don’t want to sell it. And if you want exposure, you’ve got to buy it. And if you want to buy it from people that aren’t selling, you’ve got to pay more. That’s how the market works. So, the demand for shares is higher than the supply. But I have a hard time believing that that stays.

Jake: Rembrandt’s here. Get your Rembrandts.

YouTube Disruption

Tobias: Is YouTube going to be the massive disruptor to the media industry that everybody makes it out to be? I think so.

Bill: No, it’s going to suck in perpetuity.

Tobias: YouTube?

Bill: Yeah, dude.

Tobias: You think it sucks?

Bill: Yes.

Tobias: Why so?

Bill: Because they just jam us with loads, and I don’t get any money or with ads.

Tobias: Oh, I see. Yeah.

Bill: I don’t think they’re that great. Music, Spotify is better than them in most people’s eyes. I just think that they haven’t figured out what this channel is. Cobra Kai.

Tobias: I pay for the subscription. Dude, it’s everything. I paid for it. It’s everything.

Bill: Cobra Kai was nothing on YouTube, and then they throw it on Netflix and it’s exploded.

Tobias: Because they jam it down your throat. I don’t want to watch it. It’s like playing a computer game trying to dodge the tile.

Bill: It’s very good. It’s a good show.


Bill: Johnny Lawrence’s, he’s my new favorite person.

Tobias: He’s your spirit animal.

Jake: Too many people like it, so I’m surprised you’re in on it, Bill.

Bill: Well I didn’t know that people liked him when I got into it.

Jake: That helps.

Rogan’s Spotify Fiasco And Guerrilla Marketing

Bill: Oh, the Rogan Spotify fiasco. Yeah, I got a ton of thoughts. Well, [crosstalk] need to shut up. That’s my thoughts.

Tobias: What’s your thoughts?

Bill: The employees, get a life.

Tobias: I saw a good theory yesterday.

Bill: What, you want a guy like that canceled? You want a guy that honestly has interesting conversations with people that otherwise don’t have a voice, you want that guy canceled? Go fuck yourself. That’s my thoughts.

Tobias: It’s a brilliant marketing campaign.

Bill: I’m for free speech.

Tobias: It’s a brilliant marketing campaign by Spotify. They’ve got some brilliant guerilla marketing guys in there. What’s Rogan brand? It’s free speech, talking about anything. Let’s say we’re going to shut that down. And then, of course, everybody’s going to tune into support him and show that they love watching. It’s in the same way that Netflix did that thing with Cuties, pretty gross. And I haven’t watched the show, but I did notice that as soon as it came out, it was like the number to watch show on Netflix. I was like, “That’s right. That was the trick.” You’d get some middle age– I hate to use the word Karen because I might get in trouble for that later. But that’s the idea, that’s what we currently calling it.

The Karen goes to the window and sees a painting of a nude and says this is terrible and tells that, you get a newspaper journalist to write that down. Creates a huge controversy. The next day, you got people lined up down the block to come in and have a look at your dirty painting in the window. Same thing work for Cuties.

Bill: And they said that about QVC, they were like, “Why would I want to partner with them so they can sell goods to Karens?” I was like, “Oh, first of all, that’s a pejorative term, dude. Second of all, Karen spends a lot of money so you might want to partner with somebody that’s selling stuff to her.”

Jake: Wasn’t that kind of what Howard Stern benefited from battling with the FCC. I always wondered if all of that was a bit of a Kabuki theater– [crosstalk]

Tobias: Fugazi.

Jake: Yeah, it might have been–

Tobias: Kayfabe.

Jake: [crosstalk] Fugazi to get, just to drum up interest like, “Oh, he must be saying something really salacious if they’re paying fines. And he’s battling with Les Moonves.

Bill: First of all, there’s some of that that is true. Okay, I’m really my get myself in hot water over this. But whatever. When Caitlyn Jenner called him transphobic for what he said, I listened to that entire episode. That was an insane statement by an uninformed individual, even though the joke was about them. And he was describing a joke and the fact that that can be controversial in this day and age is somewhat concerning to me. Now, I don’t know how big the problem is, and I don’t know how big the magnifying glasses but it’s insane. If what he said is actually truly controversial to people, I have a real question about where they want society to go because I am not okay with that being controversial. You start getting into that, you start even upsetting.

Tobias: There are lots of examples of those little mind viruses taking over societies, though, like they’ve burned witches, the Spanish Inquisition, communism in China, communism in Russia, like these things come up all the time, and society either pushes it back down, like you get the immune response, and it’s all over, or it takes over. And in which case, the world gets a little bit more miserable. So, we’re at that tipping point right now, I think. But I think there’s an immune response and I think it’s over.

Bill: Yeah.

Jake: Where are we going, Toby?

Tobias: There’s an immune response and it’s all over. As soon as you see people pushing back on it in the mainstream media, it’s over.

Jake: We’ll find out in November.

Tobias: No, I think it’ll take a little bit longer than that.

Jake: [laughs] Okay, good.

Tobias: Ooh, we’re getting political.

Jake: Oh, God.

Tobias: Good for some downvotes.

Bill: Yeah, for sure.

Jake: Abort.

Bill: To be fair, that was a question that we were addressing, that wasn’t just like off the cuff political commentary.

Jake: It doesn’t matter. They’ll take it out of context.

Bill: Well, whatever. People need to get a little bit harder. Go to Cobra Kai. Stop being–[crosstalk]

Jake: Bill’s transphobic is the headline already I could see.


Bill: How did you– [crosstalk]

Jake: Area Florida, man– [crosstalk]

Tobias: The podcast is cancelled.

Bill: Oh, [crosstalk] funny, quick.

Tobias: Does Apple have a greater moat than Google?


Bill: Good segue.

Tobias: That’s right. [laughs]

Apple Gimmicks

Bill: Yeah. Apple is very disappointing to me lately. I do like my AirPods. I’ll give them that. I see no need to upgrade my phone. [crosstalk] basically remind me– Dude, they remind me the cable company. They’re just bundling stuff and selling me half-assed solutions at a cheaper price because I’m in their ecosystem. That’s so not Apple.

Tobias: It is hard to keep on going. iPod, iPad, iPhone, that’s a pretty impressive, you need a genius in there to do that. Then after that, you’re not going to get that genius again. But you can still make a lot of money. Sorry, JT.

Bill: For sure. And what do they do? They get you on the financing plan, so that you can upgrade your phone, and it’s just five bucks a month. But it’s all gimmicks now to me, it’s not like, “This is a dope product, go buy it.” It’s just like, “How do we get people to recycle quicker?” I don’t know that that’s historically great in consumer tech.

Jake: I think they have a real opportunity to– I’ll take the other side, just for fun, but to be a stalwart for privacy for an individual. And to take a very strong stand for that, I think that would serve them very well. They’re not ad-driven as these other companies. If I felt there’s a company out there that was really looking out for my privacy, and my data, and that’s worth a lot to me than–

Tobias: That’s a good point.

Jake: -and I think they would be very smart to keep pushing on that-

Tobias: That’s a very compelling pitch.

Jake: –as opposed to– Android is free, basically, so that it’s can sell more ads. Facebook is trying to just sell me ads. Everybody else has an ulterior motive to the value that they’re providing and they’re backdooring the revenue in a way.

Tobias: Yeah. That’s a good pitch.

Jake: There’s something to be said for wanting to just pay up and get the service that you want and not be sold something later.

Tobias: That’s a really good pitch. Yeah. They should be leaning on that hard.

Bill: They are.

Jake: They are. You’ll see they’ll talk about that. But in today’s world, I think they have a real opportunity to keep pushing on that as a differentiating point.

Tobias: I think the funny thing is my wife’s very anti all of the intrusions. She’s got the browser that doesn’t track you and she uses DuckDuckGo and all that. So, things that she says, the problem is the experience is so much worse than using Google and those other things because the search isn’t tuned up. You do a search and you get pages of junk results.

Bill: Yeah, I would never use DuckDuckGo.

Jake: That’s unfortunate.

Bill: Google’s already got enough on me to blackmail me. What do I–

Tobias: No, you can’t leave. [laughs]

Bill: Switch it now is going to change?

Tobias: You can’t leave. [laughs]

Bill: Come on. [crosstalk]

Jake: That search history of Bill’s–


Tobias: Bill, we got your search history, brother.

Jake: Like a silk road landmine [laughs] went off?

Bill: Yeah, dude. Back in those times when you reminded me that I didn’t love myself. Google knows all those searches.

Tobias: Apple can come and sponsor this podcast, by the way.

Jake: Yeah, welcome.

Bill: Yo. I would use your products if you’d give me some of that Tim Cook money. Also, I went to Auburn, holler at you boy.

Jake: Tim Apple money.

Bill: Yeah, that’s right. Give me that Tim Apple money.

Tobias: That’s coming up on time, amigos. That was fun.

Jake: All right.

Bill: I enjoyed it too. I hope other people did [crosstalk] over my Peloton thoughts.

Tobias: I’ve been forgetting to do this. If folks want to get in contact with you guys or follow along, what’s your Twitter accounts?

Bill: No, stay away.


Bill: You don’t want this in your life.

Tobias: @farnamjake1. I’m @Greenbackd, G-R-E-E-N-B-A-C-D.

Bill: I’m @BillBrewsterSCG.

Jake: Go take a walk outside instead of going on Twitter.

Tobias: Jake has a great book that you should read.

Bill: [crosstalk] –all day.

Jake: [laughs]

Tobias: Thanks, guys. That was fun. See you next week. If we’re not cancelled, we’ll be back next week. Bye.

Jake: [laughs]

For all the latest news and podcasts, join our free newsletter here.

FREE Stock Screener

Don’t forget to check out our FREE Large Cap 1000 – Stock Screener, here at The Acquirer’s Multiple:


Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.