VALUE: After Hours (S03 E39): Value Cheap For A Reason? Late-Innings Complacency, Munger Buys More $BABA

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

  • Value Is Cheap For A Reason
  • Gamification Of Digital Advertising
  • Late Innings Complacency
  • Consider Asset Classes Other Than Stocks
  • Munger Doubled Down On $BABA
  • How $MO And Big Tobacco Can Still Survive
  • Munger’s Strategy For The $DJCO Portfolio
  • Marc Gilbert Could Make Money In Any Environment
  • Record Number of Cargo Ships Await Off the California Coast
  • The Current State Of Oil & Gas
  • $UBER Or $LYFT?
  • $PTON Share Price Down 42% YTD
  • Is $FDX A Buy?

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:

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Full Transcript

Tobias: I would say that we are now streaming live on YouTube.

Bill: Yeah.

Tobias: What’s happening, fellas?

Bill: Not much. Happy to have my– [crosstalk]

Jake: [crosstalk]

Bill: Yeah. Happy to have my sound setup back. I’m sorry about last week. I relistened to what we did and realized that I ruined some of it. So, sorry to your eardrums, listeners.

Jake: I didn’t notice.

Bill: I got a [crosstalk] times.

Tobias: I didn’t notice [crosstalk] either.

Bill: No, I got distorted. Amateur shit.

Jake: That’s us.


Tobias: It’s 10:30 AM on the West Coast, 1:30 PM on the East Coast, 3:30 AM Australian Eastern Standard time. I’ve realized that the reason that I’ve been saying that, I’ve been forgetting to tell you why it’s because we do this live. If you’d like to come and listen to it, it’s on The Acquirers Podcast channel. You can get in there and you click to get the notifications that will let you– We’ve got amigos from Spain, Montreal, Cincinnati, Israel, what’s up? Reno. Awesome. Massachusetts. That’s a good spread. It’s pretty good. [unintelligible 00:01:19].

Jake: Yeah, it’s really good. It’s a little northern hemisphere heavy, but all right.

Tobias: Tough in the southern hemisphere right now.

Jake: Yeah.

Tobias: Still winter.

Jake: Yeah.

Tobias: Dark mornings, getting darker here too.

Bill: I got no– [crosstalk]

Tobias: What are we talking about today, fellas?

Bill: Jake, what don’t you go while I think of a topic?

Jake: [laughs] Well, I–

Tobias: You’ve got veggies?

Jake: A little bit actually. So, a lot of times people complain at me that I don’t share enough personal stuff in the podcast, and I think-

Bill: Oh, we don’t want that.

Jake: -it’s a derivation of that I don’t talk about my portfolio. I think that then trickles into, you don’t share enough personal things. So, I have a little bit of a baseball story from this weekend that I’m going to share that I will still manage to torture into some kind of an investing takeaway. [laughs]

Tobias: Well, I’ve got the veggies this week.

Jake: Yes.

Tobias: I got AQR value. Is it cheap for a reason? You’ll never guess the answer. [laughs] I see there’s someone close to Roma, Queensland. How you doing, [unintelligible [00:02:29]? Hi to my old primary school, middle school.

Jake: It’s not the one school for that entire state?

Tobias: No, there are few for the state.

Jake: [laughs]

Jake: No, there are a few. I think it was like 600– it’s pretty– There are 6,000 people in the town in a few surrounding areas.

Bill: I’m going to riff something– If I can turn myself into factor, I’m going to be interested to have this conversation with you. I’m going to give a shoutout to the homie, Mike Mitchell. Member of two boards. Not one board but two boards as of last week.

Jake: Ah, all right.

Bill: Shared his work on Twitter about how he had to enter into a forward purchase agreement to acquire more shares and locked himself up. So, to the idiot that always claimed it was a pump and dump, you sir, are a moron.

Jake: [laughs]

Tobias: It’s is a very elaborate pump and dump at this point.

Jake: Yes.

Bill: It really is. He’s locked himself up and borrowed to buy more just to dump it down the road. It’s very, very smart. This is sixth-degree chess. But it’s an interesting thing. When I was watching that guy say that I knew that Mike was going through all that trying to get financing, which is part of why I got so mad at what was being said. I would just heavily, heavily encourage people that unless you’re in the room, you have no idea what’s going on. Even if you’re in the room, you probably only have half an idea.

Tobias: [crosstalk] if you’re in your own head, then you’ve got three quarters of an idea. You still don’t know what’s going on.

Bill: That’s right. Yeah.

Value Is Cheap For A Reason

Tobias: You guys want me to do– I’ll do AQR. Kick it off with the veggies, the value veggies still. This was in August 2021. Somehow, it slipped by me or saw the charts, and I didn’t go and listen to the presentation, but I’ve rectified that now and listened to the presentation. So, their question is, are value stocks cheap for a reason? There’s a comment. There’s always this comment here. What do you guys mean by value as if this is so difficult to figure out? But look, when you look at cash flow divided by R minus G, you can rearrange that cash flow and price equals R minus G. The higher the R– the two equations have to work out on each side. So, the higher the growth rate, the lower the CF figure is going to be. The higher the CF figure, the lower the R is going to be. That’s basically the idea of lower growth.

Value stocks tend to be– definitionly, they are cheaper than expensive glamor, growth, whatever. It doesn’t matter. It’s done to death. I know that Buffett says, “There’s no difference between them.” But for practical purposes, there is a little bit of a difference between them. One has very high rates of growth and no cash flow, the other one has lots of cash flow and low rates of growth. That’s the difference. So, the question is, the big spread that we’re currently observing, is it justified by the rate of growth in the growthy glamor stocks so far exceeding the rate of growth in the cheaper value stocks?

So, AQR has done this analysis. We’re currently in the 90 plus percentile of spread for all regions globally. It’s coming a little bit in the States, because we’ve had a run to value for the last 12 months. Emerging market, large caps are as wide as they’ve ever been. So, that’s an interesting opportunity there. It’s as broad now as it was in the dotcom bubble, at the very peak and in some measures– when I pulled up the French data, which is the Fama French data when you have– They’re just divided up by deciles, quintiles. You can go through and pull it apart yourself and check out what I’m saying but basically, the spread now is wider than it was at the dotcom peak. But that’s largely driven by the fact that the glamorous stuff is so expensive at the moment, it’s really unusually expensive.

But the question is, are the prospects for value stocks particularly poor? We all know the kind of stuff that goes into value. It’ll be financials, it’ll be energy, it’ll be all that sort of stuff. Does that justify the spread? How would you otherwise justify the spread? It either indicates very high returns for value or very low rates of growth in the future. If you’ve rearranged that identity that I said before cash flow and price equals minus G. The analysis that they have done, they look at five-year forward earnings growth for both cohorts. What they find is that the forward rates of growth are actually– The differential between the two is tighter now than it ordinarily is. Ordinarily, it’s about a 4% differential. It’s currently about 2% differential in forward. This is expected forecasted returns out five years. Five years is way too far in the future for anybody to be certain about this stuff, but this is what the analysts expect, as I’ve shown– [crosstalk]

Bill: What do they define growth as? Earnings growth?

Tobias: This is EPS growth. Yeah.

Bill: Okay. Yeah, I actually think I wrote Cliff about this paper.

Tobias: What did you say?

Bill: Well, I say– [crosstalk]

Tobias: Wrong.

Jake: [laughs] Yeah.

Bill: I didn’t say wrong. I said that the G in the equation is the amount that you can reinvest theoretically, perpetually times your return on equity. The R minus G is not really earnings growth in a theoretical sense, to which he said, I believe–

Jake: Who are you? [laughs]

Bill: No. To what he said that I wasn’t wrong, but I think for all practical purposes that he works for this.

Tobias: Here’s the thing though. The relationship between the reinvestment rate of return on equity, so you can calculate like– If you did an expected return type of calculation, look at what proportion of earnings do you expect to be reinvested at what rate, that would give you the active growth. I’m just blanking on this name, the professor. Greenwald, that’s Greenwald’s growth. That’s the way Greenwald calculates growth. If you do that, you find that over a very long time, it does start to look like the G, but it’s very, very noisy in any short-term period. There’s not much of a relationship I have found between the G sometimes–

Because there’s so many other factors in there, there’s other factors besides the reinvestment rate and there’s reinvestment, you don’t really know how long it takes for that to pay off. It can take years for the reinvestment to pay off. It’s not as simple as reinvest over the course of this year, get a better return next year, and so on.

I thought it was heartening anyway. I’m trying to find any reason to break the thesis. Not really not trying that hard, but I I’m open to the possibility, and I want to at least know the argument. But it seems that it’s just more work by AQR showing that value is not dead. It’s just, sometimes, it runs backwards and it might have been-

Jake: Just sleeping.

Tobias: -working for last 12 months. Just sleeping, yeah. It’s nailed to its perch. Can’t be dead.

Forward Returns Are Going To Be Lower

Bill: Yeah, I don’t know. I was thinking about this today in the car and just conceptually, there’s so much money out there that it makes sense to me why people are attracted to the businesses that are going to be huge tomorrow or perceived to be huge tomorrow. That cycle goes on long enough, it makes sense to me why the old-world businesses, which is what I assume value is, not necessarily true, but I think on average, it’s probably true. They just get forgotten I think in a market like this. I don’t know. It’s hard to call somebody that’s a client and be like, “Hey, I just bought you some Lockheed Martin.”

Tobias: [laughs]

Bill: “I know that your friends are making money on Zoom, and Etsy, and all this stuff, but Lockheed Martin’s where we’re going to invest, and you’re going to pay me a fee to manage that.” That’s a tough pitch. It’s not a wrong pitch, but it’s not the easiest pitch.

Tobias: There’s institutional, structural reasons why these opportunities tend to exist, I think, and that’s one of them. Even individual investors like, “Why did you go buy Lockheed Martin, not tobacco stocks?” or whatever. There are other sexier things out. But the problem is, as you point out though, these businesses that are going to be huge in the future have market capitalizations that are huge today, and it assumes that everything goes right, and then you probably get a return that might be submarket. The market at the moment is pretty FAANG heavy, and there’s lots of earnings in earnings growth in there, but I still think that it looks stretched. The forward returns are going to be lower.

How $MO And Big Tobacco Can Still Survive

Bill: The thing that’s really hard is, you look at something like Altria, which I don’t own at the moment– But I don’t know. Well, they kill their customers and that business is clearly dying, and that’s not great. But on average, you don’t want to kill your customers. But there’s a pretty incredible– [crosstalk]

Tobias: [crosstalk]

Bill: Yeah, there’s a pretty [crosstalk] Jake: [crosstalk] ESG wizard or–

Tobias: Oh, I like the way you said on average.

Bill: Yeah, this is probably some business that it’s okay as long as you get a lot. Anyway, gross profit is probably going to grow for the next three years here. I don’t know. At what point does the business go to zero? I have no idea. I know people have been saying, it’s going to zero for now 20 years, and eventually, it will but nobody is interested in it.

Tobias: Does the vaping, does that save them? Is it just the combustibles that–

Bill: I think long term, I think nicotine pouches are what would save them. I have a general theory that all this health trend has nothing to do with people not wanting to do drugs. It just makes them want to do drugs in a healthier way. I think a nicotine pouch is the answer to the nicotine problem.

Tobias: What’s the nicotine pouch?

Bill: They are these pouches, you can throw them in your mouth, and–

Tobias: Oh, it’s the one that, it’s already sealed up in a little [crosstalk]

Bill: [crosstalk] it’s no tobacco at all and there’s no– I don’t believe– It’s just straight nicotine, man. My degenerate friends do it, and I’ve done it twice, and I don’t like it at all. I can’t [crosstalk]

Tobias: Have they tried caffeine?

Bill: I don’t think– [crosstalk]

Tobias: Doesn’t caffeine achieve the same end?

Bill: Nicotine is not something that I can speak to and nor do I ever want to be able to. But to them, it’s a better drop.

Jake: How’d you feel? It make you all like jittery?

Bill: I couldn’t swing a golf club, man. I don’t like it.

Tobias: You feel like another one.

Bill: My knees went weak. I was like, “I don’t like this stuff.”

Tobias: Mom’s spaghetti.

Bill: Yeah. It’s not my thing. Plus, of all the habits in the world that I could introduce to my life, that’s not the one I’m trying to do.

Jake: Yeah.

Bill: I do have–

Jake: Keep our vices under control a little here.

Bill: That’s right. Yes. I’ve got plenty of– I’m smart enough to avoid them.

Jake: [laughs]

Tobias: All right, fellas, let’s–

Bill: But I don’t know. So, I think that that’s an example of what I associate to be a quality value stock. It’s true that the equity is probably not going to grow, and then in equity game, do you want to buy things where the equity is shrinking? I think intuitively, the answer’s no. But the answer is how much cash do I get back out of my equity? That’s the real question that should matter, and I’m not convinced on something like Altria or Philip Morris, you end up not getting your money back. I think it’s a [crosstalk]

Tobias: Beefy Capital has got some good scuttlebutt for us. ” There is no shortage of demand for nicotine. Step foot on any college campus and you will find half a Juul for every student.”

Bill: Yeah. So, I don’t believe that, whatever. I digress.

Jake: This all sounds like the same argument that’s always existed though of terminal value problem, growth problem, cash flow today, but you can’t see a future where it’s going to increase somehow. You can’t have everything and the bargain price, right?

Tobias: Yeah. Well, that’s a good point.

Gamification Of Digital Advertising

Bill: Well, I think Facebook is a good example of something that is not an old-world company. But Facebook to me feels like the new nicotine. All the potential regulations and stuff– I don’t know. If people want to put the responsibility of policing those platforms to Facebook, then I have a high degree of confidence that no one will ever be able to build another social media site.

Jake: What do you think about these reports though that you see pop up periodically, where they talk about how gamed the whole programmatic advertising world is and that it might be all a bunch of bullshit? At least the cigarette, the user who buys it feels some benefit from it, even if there’s a long-term cost. But if you’re an advertiser, which is their real customer, it’s not you, the user, right? But if they can’t prove or at least [crosstalk]

Tobias: Ordered it.

Jake: Yeah, if it starts to become proven that there’s not getting that traction that they are expecting from all these ad dollars, then that’s a real problem, isn’t it?

Bill: Yeah, but I forget what the citation was last week when Facebook’s apps went down, one guy said, e-commerce sales declined. Here’s the thing. I don’t think it would be hard to prove to me that targeted advertisements on Facebook and YouTube are not better than television. A lot of people, if you ask them about their experience on Instagram, they enjoy the ads. That’s a common thing that people say. I have found the ads highly relevant. Twitter is less so. So, I don’t know. I’m not sure what the better alternative is. Even if some of these numbers are not perfect, I still think they’re probably directionally closer to accurate than not.

Tobias: So, they’ve got an idea about the clicks. The issue with the news media company that’s just had this stumble, that startup, I’m just blanking on the name again at the moment, but they’ve been using that really junk traffic apparently [crosstalk]

Jake: Ozy or something like that.

Tobias: Ozy. Yeah, that’s Ozy? Yeah. It’s possible–

Bill: I got to go to Australia.

Tobias: I think, it’s O-Z-Y summit, one of those, that though we’re using this traffic thing, which pulled up a hidden page in a browser and so that then Canada’s a click. Advertisers don’t like that evidently.

Bill: No, that ain’t right.

Jake: Well, it’s like click farms, and fake followers, and all kinds of this machinery behind it to make it look as if you are actually reaching a customer, but you’re not.

Tobias: You would think that Facebook could show pretty easily– They’ve each profile, and you’ve got to have an idea whether their profile is real and not, haven’t they?

Jake: Yeah, but maybe–

Tobias: I mean, it’s to their advantage.

Jake: Maybe they don’t want to know.

Tobias: Yeah. That’s a good point.

Bill: Yeah, I don’t know. I still think it’s better than the alternative. But I do agree, it’s probably not as good. Their stats probably overinflate how good they are at advertising.

Jake: When you hear stories about big companies totally slashing their social budgets and seeing no change in revenue, that’s not a good sign, right? You take $300 million out of your social budget and there’s no noticeable change.

Bill: Yeah, I don’t know, man. Sometimes, I wonder how often those headlines are real and how often it’s like they’re coming out in the middle of some social scandal, and CEOs feel a need to pontificate about any issue that’s political now. So, they make a statement and then they backtrack it, and nobody actually goes back and says, “Hey, did they follow through on this?” Because nobody cares anymore, because the news cycle changed.

Jake: That’s a good point.

Tobias: I feel like they pull back and then see if there’s a change, and then if there is a change, they just lean back and they just don’t announce that they lean back in.

Tobias: There’s also the– everybody’s getting more sophisticated at marketing through those channels. So, it’s much more competitive than it used to be. Everything, the keywords get bid up to very expensive levels, because now people get an idea how much money they can make. So, the customer acquisition costs, they’ve got a better idea what they can afford. They spend more money, they A/B test it, so it’s just razor sharp, and then they’re spending lots of money, but then so is everybody else. Everybody’s standing on their tippy toes at the parade. “Now, we’re spending so much money, and we’re really, really good at this, and the return is lower than it used to be. Must be fake clicks.”

Bill: Yeah.

Jake: Yeah. [crosstalk]

Bill: But they [crosstalk] fake clicks. Except for YouTube. YouTube’s the best. Please monetize us.

Tobias: [laughs]

Jake: Yeah. Please don’t take it away, daddy.

Bill: That’s right. Well, Jake, you want to go?

Late Innings Complacency

Jake: Sure. Like I said at the intro, sometimes, there’s a lot of sometimes people complaining that I don’t share personal things, whatever. [laughs] So, this weekend, both of my boys are pretty heavy into sports and we’re in the middle of the soccer and fall baseball season. On Saturday, we played– So, I coached my older son’s– I’m one of the coaches one of the older son’s baseball team, which is amazing by the way. I get to spend so much quality time with him about something that he cares about, and I enjoy it as well. So, really, it’s a true blessing to be able to do it. But we had a double hit–

We’re in a tournament. Just to set a little bit of a context, our team is a neighborhood team that was taken out of Little League, because we like the families, and we like all the people and the kids and then we’ve just– basically, it’s sort of invite only just this little group that is our team. But we play in tournaments, and it’s a “travel ball” situation” very competitive, where we play teams that are like academies and tryout teams where they’ll just take a 100-mile radius and take the 12 largest 13-year-olds, and these are kids who hit puberty two years ago, and they’re 6’2″, 210, strapping young men already and we’ve got all these little kids still, basically. Yeah, that’s the competitive world that is travel baseball.

Anyway, we are in a tournament this weekend and Saturday, we ended up winning both games and getting a pretty good seeding, which I was pleasantly surprised with. So, we show up Sunday, and it’s in the fourth inning, and our starting pitcher’s cruising, and we’re up like five to one, and then six to two into the fifth inning. We’re playing pretty good baseball. We could tell the boys started to relax a little bit like, “Oh, we’ve already got this one. We’re looking to the next game already.” And the baseball Gods do not smile kindly upon that kind of disrespect. We end up losing the game 10 to 6.

Tobias: Oh.

Jake: It was just a brutal loss, and it was a lot of mental mistakes. Little things like not knowing where the play is going to be. So, that’s a huge part of baseball. Baseball is a little bit like war in that it is like hours of boredom followed by little moments of panic. You could sit out in right field for three innings and not have a ball come within 200 yards of you. Then, the ball could get hit to you all of a sudden, and you’ve got to know exactly what you’re going to be doing. So, you have to stay mentally locked in on every single pitch. But when you get up and you are kind of cruising, that’s where you left off a little bit as mentally. So, we had guys overthrown the cutoff guy on a hit, and then the guy gets an extra bass and now double plays on an order. It’s a million little things that break down and turn into that kind of loss. Just real painful as a coach and as a dad to watch the meltdown and not be able to really do anything to stop it.

Anyway, where this comes in from an investment standpoint, is I think there’s a lot of people who are up 6 to 2 in the investment game right now, and whatever inning it is, they might have turned off a little bit of some of the little things that they should be doing to keep their head in the game, and they feel they’ve already got this one won, and they’re sort of looking to the next game, and salting it away here. I would just caution that you can’t ever really lead up in that way and that you have to keep your– The next ball might be getting hit at you at any time. If you don’t preplan on what you’re going to do when that happens, where you’re going to throw the ball depending on where it’s hit, all of these little things that we’ve talked about before about having a Ulysses contract with yourself as far as you know if something gets to a certain price, I want to buy it or I’ll sell it at this price. I know that selling is a taboo word now, but–

Tobias: That’s where he went wrong

Jake: That’s where he went wrong.

Tobias: -selling at that price.

Jake: Selling it at an unreasonably high price is the worst thing you could ever imagine. But anyway, I think the translation to me is like, “Boy, if you get complacent, the baseball Gods and probably, the market and business Gods will remind you that you’re miss stepping there.”

Tobias: The baseball Gods and the market Gods know each other pretty well.

Jake: They’re homies for sure.

Tobias: They’re looking for reasons to punish you for complacency.

Jake: Yeah, and they’re looking to add some humility to your life.

Bill: This reminds me a lot of my segment last week.

Jake: It does. That’s what I [crosstalk] tied it together.

Bill: It’s like what I was saying a little bit with how I messed up. I think I got a little lax on some stuff.

Jake: Sure. So, our underwriting of risks can become lax, our underwriting of expected growth, or multiple, or exit multiple can start to get lax, and you could talk yourself into some stuff. That’s just the way that this works.

Bill: Adjusted EBITDA exit multiples, those are best.

Jake: [laughs] They’re always high.

Bill: Yeah, good account.

Tobias: You also have the problem where, at the start of a cycle, whatever the cycle might be– we’ve had a pretty good run to tech from 2015 to date. At the start of that cycle, I ran back the other day and had a look at Microsoft in 2000 and I might be a little bit wrong on the data. I can’t remember it was 5 year or 10 years. So, let’s say 10 years ago. 10 years ago, you bought it on like it was a nine times free cash flow multiple. So, it’s like an 11% free cash flow yield, and then run it forward 10 years, and the earnings have done really well, and that stock has done even better because the multiple has expanded five or six times over that 10-year period.

But if the dopamine receptors are getting pleasure from finding those kinds of opportunities where it’s going to be high rates of revenue growth, high rates of earning, lots of free cash flow, reinvestment at a higher rate, and it just gets– Every time you buy it, it just goes up. That’s how you get a little bit complacent. The same thing happened to me in a value context, probably 2015, as I talk about every single month, I guess where Jake pointed out that the spread was very, very tight, and that would have probably been a good time to go and buy some of those techier stocks and didn’t do that. Stuck in the in the in the dogshit deep value.

Jake: We’re all just learning, Toby. It’s okay.

Tobias: [laughs]

Jake: [crosstalk] What is the next one?

Tobias: Had enough lessons. It never ends.

Jake: It never ends.

Bill: The lesson can go on for much longer than you want it to, sir.

Tobias: It’s true.

Jake: Try not to relearn them. That’s the ticket.

Tobias: I would be happy just to do that. Not to relearn the same lesson over and over again. Haven’t figured out how to achieve that yet, but at some point, some maturity maybe. Have you come up with anything, BB? I’ve got– [crosstalk]

Consider Asset Classes Other Than Stocks

Bill: Dude, just real quick, because you turn yourself quant. So, I’m curious of your thoughts on this. I’ve just been thinking a little bit. My wife has not loved the volatility. She liked it on the upside. The downside vol, she preferred to avoid. It hasn’t really fazed me all that much. But her being fazed has fazed me. So, I’m trying to think about whether or not there’s a way to recreate myself through an ETF for some of my capital so that it’s like, “Okay, well, even if I capture 85% of what I believe in, if I put 60% into that strategy, I can still toy around with 40.” By toy, I don’t mean like just do nothing and treat it like nothing. But really try to outperform, and also, frankly through the podcast, I’m meeting a lot of interesting people that are doing things that aren’t necessarily in public markets and I want to allocate a little bit to that, whether it’s real estate or whether or not it’s private market stuff, and I was talking to Meb about a little bit about what he’s done in the private markets and it’s cool.

So, I just kind of wonder how you would think about going about building a strategy for yourself. I know you did it but just what your decision was on that. It’s something that I’ve spent a fair amount of time thinking about over the last two weeks, and I’m coming to the conclusion that it probably makes some sense for some stuff. For instance, I have no exposure to emerging market value right now. If any quant is correct, that’s an insanely good place to at least have some exposure to it. I’m not going to go dig through emerging market value companies and pick a specific company. So, maybe the answer is, “Okay, well, I take a slug and I just allocate that slug to that particular bet.” I guess that just to wrap up the thought, the pushback that has come back that I think is valid is like, “Well, if you want to do that, fine but it’s better look for quality companies” or something. I don’t disagree with that.

But I think that, if you’re intellectually honest about what’s gone on with US-centric returns, and if you’re running a US book, you’ve got to at least acknowledge that a lot of your return is a function of the market return. So, hedging some of that exposure seems moderately prudent given where we appear to maybe be. It doesn’t have to be huge, don’t have to call a crash, don’t have to do any of that, it’s just something that I’m thinking about, and I’m like, “Okay, there’s data and ignoring the data has been a perilous activity in my past.” So, I’m just trying to figure out how to potentially implement some of the smart thoughts that I’ve had, that have crossed my brain.

Jake: There’s a little bit of research on this that’s in Kahneman’s new book, Noise, where he talks about how a model of yourself has the potential of outperforming you, idiosyncratic you. A lot of it is because it reduces the noise, what he would call occasion noise, which is what version of you is showing up today to make the decisions. So, there is some logic behind all that and Toby probably will speak even more intelligently about it.

Tobias: Well, there’s two things. There’s a research process which is what has worked historically and what are the reasons why it has worked. Value has a factor or that’s price to book specifically, or value more broadly is any of those ratios. This is not talking about the Buffett calculation of intrinsic value which is weighing the growth rate and so on, and doing that sort of work. I’m just putting that to the side for a moment. But there’s no reason why you couldn’t do it that way to bind in growth to your valuation. I’ve got a trivial exercise and have your computer go and do all these valuations for you. Then, you have other factors that you know that have worked like quality as a factor has worked which just makes complete sense. I mean, at what that’s a return on assets, at what rate are the earnings being transformed into cash flow.

All of that is simple enough to do, and then the advantage of having done all of that is, as Jake points that, when you go to implement it, it’s being implemented consistently over time, and the problem is that it’s enormously noisy. There are periods of time when you just feel everything that you do, even following a program that is pretty well researched, everything goes backwards which has been the experience for value guys for 10 years, and you know more painfully particularly over the last five, and over the last three excluding the last 12 months which has been a little bit better. So, that would be the process. You just decide what you want to do. You could build a– I see Mike Mitchell’s in the comments. You can see him–

Bill: All right. Shoutout to Mike.

Tobias: Mike Mitchell, which might be like–

Bill: I could just go singularly long lumber company and have the Mike Mitchell factor exposure, but I’m going to avoid that one.

Tobias: It is any mix. You could turn into activist involvement on this kind of valuation. You can do it any way that you want, and you just test that, and then you can implement that, and do that pretty strictly. If you’re looking overseas to implement this thing in an emerging markets type, those already exists. Perth tall has the freedom, ETF– always give a shoutout to Perth. Oh, that’s not value, but it’s EM excluding China. I think a lot of the EM issues at the motor probably China related. When you can look at Alibaba, for example, I see there are questions about Alibaba and you would see–

Bill: People can’t stop asking us about Alibaba as if something happened over the last three weeks that we had– [crosstalk]

Munger Doubled Down On $BABA

Tobias: Well, Munger bought some. [crosstalk] Didn’t we literally come off in the first Twitter as Munger’s reupped on Baba. So, we should talk about that a little bit.

Bill: Well, why would Charlie change his opinion on China over some stock movement?

Tobias: There was some suggestion that he’s sold out of a position. I don’t know where that came from. I looked that as [crosstalk] sold out.

Bill: Buying an idiot. These people don’t know shit. Unless you’re in the room you don’t know. Don’t speculate. That’s the answer.

Tobias: It’s unusual for him to reverse course like that, that quickly.

Bill: Yeah. Unless Charlie himself gets on CNBC and says, I have sold Alibaba, I don’t believe anything that anybody says and call fake news on financial rumors.

Jake: Let’s try to remember. I don’t remember a time where he’s doubled down on something before.

Bill: Oh, I’m sure there’s been times. They were buying blue chip stamps. [crosstalk] bought it to multiple times.

Jake: Okay. All right, let me reframe that. In that public-run portfolio that where we get to see what he’s doing in real time, I don’t recall him ever doubling down in Daily Journals portfolio [crosstalk]

Tobias: [crosstalk] one shot. He just hurls it all up and then he doesn’t do anything with it.

Jake: Then it goes back to architecture and whatever else.

$DJCO SaaS Company Or Long $BABA

Bill: Well, dude, to be fair, that’s because he’s usually bottom taking stuff. Charlie is not used to buying and having it go down. I do think it’s hilarious that the Daily Journal shareholder base once thought that they were long a company that was transitioning into a digital court filing system. Now, they are super long Alibaba. [laughs]

Tobias: You get [unintelligible [00:37:32] just about anybody else, I think.

Bill: Yeah. Backing [crosstalk] Munger.

Tobias: [crosstalk] most interested company.

Bill: Look, man, if you got into Daily Journal, you knew Charlie would do whatever the hell he wanted. That was part of the deal. You get to live with it, and it may work, it may not. But you can’t blame anybody but you.

Tobias: James T’s brought up a great Charlie Munger story where it’s the middle of the financial crisis, and he’s done nothing with all the cash for years and years, and he literally has to pull over on the side of the 405 to phone in his trade. He must feel it. There must be a little bit of FOMO there if you can’t wait until you get back to the desk, got to do it now.

Bill: You know the only reason that I don’t believe that story?

Tobias: Is it not true?

Bill: I’m just telling you why I don’t believe it. If you’re on the 405, you’re already stopped.

Tobias: [laughs] You can’t pull over anywhere on the 405.

Bill: Yeah. You don’t need to pull over.

Jake: The math doesn’t check out on this story.

Bill: Yeah. It’s just not. I don’t buy it. I want to know what time of day it was.

Jake: He’s got a broker though too. So, it’s not like he’s in there placing trades on [crosstalk] Schwab account.

Bill: I’ve always been like, “Nah, the 405, he was already stopped. He just dialed the phone.” Got mad love for LA though. Don’t love driving around it, but I do love LA.

Tobias: It was great in the depths of the pandemic when everybody was doing a cannonball runs from East Coast to West Coast.

Bill: Oh, yeah.

Tobias: Every person who has grown up in LA has these theoretical times where you could get from somewhere to somewhere in like an hour. Then, the only time that you can really do that is Christmas Eve or-

Jake: 3 AM.

Tobias: -Christmas morning at 3 AM. Yeah, that’s the only time of the year you can do it. It’s purely theoretical. Every other time, it’s like three times or three hours.

Record Number of Cargo Ships Await Off the California Coast

Bill: I’ll tell you what’s crazy, man. I drove PCH back from Malibu up to LA. There’s a lot of boats in the water, enough to create an oil leak apparently.

Tobias: Oh, yeah. [crosstalk]

Bill: While looking out there, it’s like, “Well, there’s all our goods.”

Tobias: I tweeted that chart out a few weeks ago. That is a scary chart showing the– It’s still at that exponential vertical part of the curve with all of the boats stacking up out here.

Bill: Yeah.

Tobias: I don’t know how that gets resolved. They’re talking about that the end of 2023 to resolve that. That’s if everything goes well.

Jake: Didn’t Krugman say we should sink all those boats, so we can get on that GDP when we recreate all that stuff?

Tobias: [laughs]

Bill: I like it. Good idea.

Tobias: Makes sense. The math checks out.

Bill: The math does check out. Poor Dollar Tree would be like, “What do we do?”

Jake: That’s how you build real wealth.

Tobias: That is.

Bill: Flip to the Fed.

The Current State Of Oil & Gas

Tobias: You guys want to do some oil? You guys got any views on oil?

Bill: No. I never will. Ever.

Jake: [laughs]

Tobias: You’re going to be like when you’re [crosstalk]

Jake: Seems like it’s been going up.

Tobias: Yeah.

Jake: Almost as if supply and demand might move around a little bit occasionally, and price could change on things, and maybe you shouldn’t get too wedded to the future. [laughs]

Tobias: To what extent–

Bill: I’ll tell you an idea I’d be open to. Refineries. I would be open to refineries. But I don’t know how to predict crack spreads, how to normalize that shit. I [crosstalk] I don’t know.

Tobias: [crosstalk] both sides. It’s a shitty business.

Bill: Yeah, but they’re not making any more.

Tobias: Well, that’s a good point. Yeah.

Bill: That’s the part that I like about it. It’s going to be super capital starved and I don’t think our need for oil is going away anytime soon.

Tobias: That is a weird business front. It definitely has a moat, but it’s got no pricing power.

Bill: Yeah, you just take it on both sides. But I guess, I guess you got to hedge that out.

Tobias: You could never build another refinery.

Bill: [crosstalk] spread

Tobias: Maybe in Texas, but nowhere else or though.

Bill: And I think it’s worth the money, man. I don’t think you get a good return.

Tobias: Well, yeah.

Bill: yeah. So, that’s my thoughts on oil.

Jake: Hmm.

Tobias: To what extent does OPEC actually control anything? They make the noise, but does it do anything? Nobody knows.

Bill: I have no idea.

Tobias: Speculate. This is a podcast.

Jake: I do like Munger’s thoughts that he’s been saying now for 20 years that we should probably be saving a lot of this stuff for future generations to use, as chemical feedstocks fertilizer, plastics all the other stuff that we’re going to want to build the future, and not so much that you can go the grocery store or whatever. [laughs]

Tobias: He was sitting on paper and get the oil in and saving will all appear. That was his argument.

Jake: He says, it’s one of the greatest resources that we have as humanity and that we should probably try to save it for future humans, and not just be as selfish. But he’s always been a guy who’s willing to take some pain now for future gain potentially. I respect that.

Tobias: Is the US still the Saudi Arabia of gas? [crosstalk]

Bill: I think the reason that we have all that gas is the gassy wells in the Permian that when they were fracking, a lot of gas was coming out. Now, that there’s less fracking activity, there’s less gas being released from the wells, I believe. I suspect we still have the gas. I just don’t think we’re letting the gas out of the ground.

Munger’s Strategy For The $DJCO Portfolio

Tobias: Yeah. What about Baba? Let’s speculate on Baba. Where are we at on that? Now, that Munger’s back in, we know that he’s doubled up. Now it’s a good idea, again.

Bill: Oh, okay. Cool.

Jake: Everybody into the pool.

Tobias: [crosstalk] 15%. Back into the pool.

Jake: [laughs]

Bill: [chuckles] All right. Yeah, sure.

Tobias: Turns out it was just [unintelligible [00:43:28]. [crosstalk] No. Is that Australian?

Bill: I guess you’ve got to buy it.

Bill: The Aussies will enjoy that joke.

Bill: You’ve got to buy it. My portfolio has none.

Tobias: What’s the correct weighting? It was like a 7% weighting and 15%– Don’t listen to that. I’m totally joking. I get no idea. How much does Munger run in the portfolio now?

Bill: It’s in Daily Journal. It’s an insignificant portion of his wealth.

Tobias: What is it proportionate to DJCO?

Bill: Who gives a shit? DJCO is nothing relative to his wealth. So, who cares how much it is relative to DJCO?

Jake: No. Come on now. He’s got a fiduciary responsibility to run DJCO.

Bill: I’m sure he’s not trying to lose money. I’m just saying I wouldn’t look at the portfolio weighting in Daily Journal, and then in some way, shape, or form say, “Okay, well, that’s Charlie’s look through waiting.” No, that’s not at all the truth.

Tobias: But for the portfolio, he’s got to treat the portfolio as if it’s the correct weighting for a portfolio.

Bill: No, he doesn’t. He has never rebalanced Wells Fargo once. He doesn’t treat that portfolio like it’s some theoretically correct thing.

Tobias: That’s fair. It’s not that a– [crosstalk]

Bill: [crosstalk] hasn’t touched Bank of America since he bought. He just buys cheap stuff and lets it sit and compound.

Tobias: Yeah. We’re going to see. He does you know how this stuff is done you got to trade it all the time.

Jake: You’ve got to churn that puppy. [laughs]

Bill: Yeah. I don’t know. I just don’t think he runs portfolio like, people think portfolio should be run, which is why he has extremely good results. To get different results, you have to act differently. It’s not some crazy statement. It’s just very few people are willing to do it.

Jake: Well, few people have the leash to do it in that kind of way, right?

Bill: And the fortitude, man.

Jake: And the fortitude.

Bill: It’s not that easy emotionally.


Tobias: Someone’s asked a question about Uber. I like Uber. I like that business. I’ve noticed that the pricing has gone up pretty. There’s no competition between Uber and Lyft, which just doesn’t have any cars anymore. Uber’s got all the cars.

Jake: Is that right?

Tobias: Well–

Jake: That was LA thing.

Tobias: Could be an LA thing. Yeah, when I go to use the app, there’s just no Lyft drivers around. I always thought Uber and Lyft drivers were the same car. I just sort of switch over to see which one’s got the best-

Jake: Rate.

Tobias: -rate and [crosstalk]. Yeah. But I like Uber as a business. It’s distributed– Taxis have been a great– Taxi medallions, taxis have been a great business for years and years and years. I think Uber has just sort of stepped in and taken all of that business in one go. I don’t know about the price. I haven’t looked at the valuation of it. No idea. I’m just talking about the business. Is that an LA bias? Someone said LA bias. I don’t know. I would like there to be– I try to use Lyft every time I can because I want there to be a good competitor to Uber.

Bill: [crosstalk]

Tobias: He is in Lyft, right? But he was in Lyft five years ago, seven years ago. He got it cheap.

Jake: I like the idea from a human species standpoint of better resource utilization. Instead of having cars that we drive 5% of the time and they sit 95% of the time rotting away, that’s probably a good thing. However, we need to do to coordinate that I think it’s pretty cool. I don’t know if the economics totally work on a unit basis at this point, these prices, we’ll see, and maybe it starts — Probably looks a lot less competitive as you increase the price obviously compared to the tradeoff of convenience of just having your own car versus ubering everywhere.

Bill: [crosstalk] owns it.

Tobias: What do they own? Lyft? [crosstalk]

Bill: Uber.

Jake: Who cares?

Bill: Oh, it’s interesting.

Tobias: He says who cares. There’s no Marty Whitman anymore. Oh, sorry. I am–

Jake: oh, that’s low.

Tobias: Yeah. low.

Jake: I’m kidding. I know Dan listens. I know he’s a big fan [crosstalk].

Bill: Yeah. Shoutout to you, Dan. You’re the man.

Tobias: [crosstalk] give these days.

Jake: Yeah, Toby surfing with him and he’s not listening.

Tobias: Yeah. That’s a good point. Dude, that was bad [crosstalk]

Bill: Oh, he’s owned Restoration Hardware, I shouldn’t have looked at his portfolio. Now, I get triggered.

Jake: [laughs]

Bill: It sucks. Good for you, Dan.

Jake: What’s this [crosstalk] on that?

Bill: Not looking anymore, I don’t want to see it.

Jake: [laughs]

Tobias: What about when everybody gets an electric car? So, the two questions are fully self-driving electric cars and who owns all the fully self– Is it Waymo, is it Tesla, is it Alibaba?

Bill: This is so far away. So far away.

Tobias: But why not? Dude, I’m looking forward to when I get my– It’s a self-flying car. I’d be happy not to own that. I’ll just like click my app, send me myself self-flying car to [crosstalk] where need to go. That’s sounds great.

Jake: Full Jetsons.

Bill: I don’t know, man. I’m an old man. I want like a ’69 Chevelle. I want it to smell like a boat [crosstalk]

Jake: 454 or 396? What do you got? I don’t know.

Bill: I think the 454 is like more–

Jake: You can’t handle that much power probably. [laughs]

Bill: Yeah, probably not. I have a feeling that those bigger engines are what people like, but then the smaller engines actually drive better. I don’t know if that’s true or not.

Jake: Feel like this is– Oh, sorry, I thought you were subtexting something else. [laughs]

Bill: I was. I’m basically just trying to run cover for myself.

Jake: Okay.

Tobias: Why has nobody taken the approach– Rivian is another EV maker. They’ve got a skate, and they can stick two different types of chassis on a skate. They’ve got one that looks like a SUV and another one looks more like a truck. So, why has nobody taken any of those classical designs, I don’t know, modified enough so–

Jake: Yeah, like [crosstalk] mod for Chevelle or something.

Bill: I think they will.

Tobias: Yeah.

Bill: Yeah. We’ll be all right. Be kind of week to hop in a Chevelle and just–

Jake: [sound]

Bill: Yeah, that’s right.

Tobias: Like you get the engine sound–

Jake: sound.

Tobias: Yeah, it’ll just come out of speakers. Vroom, vroom, vroom.

Bill: Yeah, that sucks.

Jake: Like the vibration in the seat as if you were engine was rumbling.

Bill: Yeah. I had a ’71 Cutlass once, and whenever I would get out of that thing I smelled like gasoline.

Jake: Gangsta.

Bill: Yeah. It was awesome. I really liked it. My wife liked it too.

Tobias: I think we’re still going to be consuming a lot of oil, particularly when we’re making electric cars, because there’s a lot of plastic and a lot of other things that go into them.

Bill: Yeah. I don’t know. I’m going to keep driving a gasoline car, because I don’t want to support child labor for rare earth miners. But if you want to kill children in foreign countries and say you’re better than me, do it.

Tobias: There’s no rare earth minerals in regular cars [crosstalk]

Jake: For 10-year BESGs. [laughs]

Bill: Yeah, that’s right. BESG and just outsource all that other countries. Huh? Bill: Sorry, Toby, I’m making smartass comments.

$PTON Share Price Down 42% YTD

Tobias: How’s your Peloton?

Bill: Rode it yesterday, actually. Looked in the mirror, thought, “Boy, you’re fat,” and then rode it more.

Jake: [laughs]

Tobias: I say you should put a mirror in your kitchen. I don’t know if a mirror near the Peloton is going to help.

Bill: Dude, it didn’t help me yesterday, I’ll tell you that. It got me depressed.

Tobias: Are you still using it as regularly as you were when you first got it?

Bill: No. But I do think that their app has very good workouts. I think you could probably replicate it with YouTube. But I do think that there’s something to be said for merchandise-packaged product that they have. I’ve used the app at the gym, and then I used it to ride the bike the other day, and then I call myself fat, and then I cry, and then I get over it, and then [crosstalk]

Tobias: [crosstalk] 30 bucks a month for the–

Bill: I think, it’s $40 now.

Tobias: $40.

Jake: For the app?

Bill: Yeah. For the full app.

Jake: Ah, found your inflation.

Bill: Yeah, well, it’s still [crosstalk]

Tobias: The episodes were only 25 minutes long. Now, [unintelligible 00:52:16] 30.

Bill: Oh, Jesus.

Jake: Shrinkage [crosstalk]. Dammit.

Tobias: Shrinkflation.

Bill: I just take two. I need Alex Toussaint my life. But I do like it. I don’t know. It’s not as exciting as it was when I got it. That’s not too hard to fathom.

Tobias: What’s to stop somebody who’s reasonably attractive with some lighting and a camera just broadcasting it on YouTube and saying, “Subscribe to my channel, it’s free. We’re doing what we’re doing.”

Bill: Oh, I think they do.

Jake: Is that what we’re doing?

Bill: Yeah, more or less.

Tobias: I’m on a Peloton. You’re not riding your Peloton?

Jake: I would say reasonably attractive.

Bill: I take my shirt off, I’ll ruin all our views.

Jake: Yeah, that that’s definitely demonetizing.

Tobias: This is a show more for radio than for TV.

Bill: Yeah, for sure.

Jake: Although we did win the best hair division for three-man value podcasts. So, that’s [crosstalk]

Bill: Did we?

Tobias: Yeah.

Bill: Where was that?

Tobias: You didn’t get your plaque from YouTube?

Marc Gilbert Could Make Money In Any Environment

Bill: No, my hair doesn’t look very good lately. I interviewed this guy, Marc Gilbert, for Moses Kagan’s conference, and I look awful. Awful. But Marc is super interesting. That dude is a must follow on the Twitter machine.

Tobias: What’s the pitch? What’s Marc’s story?

Bill: Oh man. He does wild stuff. He doesn’t mind buying. He took over a gas station that had environmental problems like environmental liabilities, assumed the liens. He’s got a cleanup plan. He’s going to develop it. I guess you can’t put apartments on the first floor, but you can put parking on the first floor, and then lift the structure above it, so you can have apartments on the second floor. I asked him, “Do you have to disclose that you’re on top of [crosstalk] gasoline,” to which he said, “No, you don’t,” and I said, “Yeah, why would you?” That’s crazy. [crosstalk]

Tobias: Not in California though [crosstalk]

Bill: Yeah, well, he’s in New Jersey. But he’s like a very New Jersey specific investor. He doesn’t limit himself to one asset class, but he does focus on geography, and dude loves living in litigation. I think he does stuff that sounds like absolute hell, but if you’re interested in asset-specific alpha, that guy generates it. I said to you guys, I don’t think there’s any environment that he would lose money in. Any. I don’t say that lightly. Couple of guys you meet, that dude knows how to make money. He’s one of them.

Is $FDX A Buy?

Tobias: Do you guys have any thoughts on FedEx?

Bill: Yep, planes and the paper got an initial F.

Tobias: [laughs] Yeah, that’s right.

Bill: No, I looked at FedEx a while ago. I would not get interested in FedEx here.

Tobias: Is that almost like a thematic point– like you think? Because I had this thought a few years ago where I was like everybody’s got boxes piled up outside their front door. They’re all Amazon boxes, but they’re being delivered by just about everybody, maybe going to take a look at FedEx. I think I decided not to do it at the time, but it’s run up since then.

Bill: Look, you’re just constantly investing in equipment. I got interested in when they closed on this European acquisition, and then they had this huge cybersecurity breach that really messed up their integrations. I was intrigued then. But here, I don’t know, what’s my variant perception, that people are going to order more boxes? There’s better places to play. If FedEx is my best idea, I should just get it factored at– I should just ETF my whole portfolio and be done. I’m not working hard enough.

Tobias: Wabuffo says, “BABA is probably 12%-13% of the DJCO portfolio after the recent purchase $360 million roughly.” So, that’s the whole portfolio, Baba is 44.7.

Bill: Of the portfolio?

Tobias: Yeah, 12% to 13%.

Jake: Sounds about right.

Bill: Yeah. How much does Charlie own of Daily Journal? I don’t know. Somebody should do Charlie’s look through ownership on Baba. But then you got to know his Li Lu position too, which I’m sure Li Lu has a fairly large Baba position.

Tobias: But he’s got to treat that portfolio as if not everybody else has a big holding in Berkshire and other things like that.

Bill: Charlie Munger doesn’t have to do shit. You and I might have to treat it a certain way. Charlie doesn’t have to do anything.

Tobias: 12% to 13%, that’s not crazy. That’s modest, isn’t it? I mean it’s immodest but it’s not lunacy.

Bill: Relative to how we used to run a book, it’s very tame.

Tobias: When do you think that sort of–

Jake: Starter position. [laughs]

Bill: Yeah.

Tobias: [laughs] Still reading the filings.

Jake: Toehold. Yeah.

Tobias: Yeah, I guess he was like 80%– or he was like, that’s right. Even more than 100% something, he’ll leave it up to buy it.

Bill: He’s a monster.

Tobias: He doesn’t mind the volatility in the portfolio.

Bill: No. Why? One reason why I have such respect for Mike Mitchell. Same type of guy.

Tobias: Li Lu sold out of Alibaba.

Bill: I don’t believe it. Fake news.

Tobias: Li Lu does not own Baba. It’s from two different people. Trevor Scott [unintelligible [00:57:57].

Bill: There you go. Well, Scott may know.

Tobias: Yeah.

Bill: Who was that?

Tobias: Trevor Scott.

Bill: Oh, Trevor Scott. Yeah.

Tobias: Paul Higgins [unintelligible [00:58:07] also Li Lu [crosstalk] Ali Baba a few years ago.

Bill: All right. Well, I believe him.

Jake: My boys.

Bill: Munger fading Li Lu. Ooh, I like this setup.

Jake: What if he bought shares from Li Lu, but they didn’t know they were on the either side of the transaction?

Tobias: Eskimo brothers.

Bill: Excuse you.

Tobias: In the stock market?

Bill: Yeah, I don’t know. This goes to show you how much I follow this stuff. I just simply don’t care.

Jake: [laughs]

Bill: I don’t care what other people are doing. I don’t really care what Charlie’s doing.

Tobias: You don’t care what Charlie’s doing?

Bill: I care more about–

Tobias: Given how infrequently he trades and that man’s track record, every time he buys something, you don’t think maybe I should own a little bit of that?

Bill: No, I don’t. I really–

Jake: I didn’t want to say own, but a look at it I think is a very reasonable response.

Tobias: Yeah.

Bill: Yeah. I don’t take that takeaway. I really did like the purchase, and I think that it’s a great– I hope it works because I hope it’s one of Charlie’s very last lessons to give to people, and I hope that he’s successful because Charlie Munger is the G and he deserves more success because he is. But I don’t have any better view on Baba than I had before he bought it. Every time I’ve ever been like, “Oh, I should look at this because this person bought it,” I’ve got my ass kicked. So, I’m just kind of done with that.

Jake: I hope it works more from, if it doesn’t work, some of the reasons that it doesn’t work would probably be bad for humanity.

Bill: Yeah.

Tobias: Zagabog says, “Cobalt- and coal-generated electricity are used in refining petroleum.” There’s just no escaping it.

Bill: There you go.

Tobias: Charlie Munger for life advice, Warren Buffett for investment advice, fair?

Bill: If you give me those two, sure. I probably go elsewhere for both life advice but–

Tobias: It’s a false choice, but it’s a podcast. So, there you go.

Bill: I mean, Munger’s the man–

Tobias: Charlie Munger’s got it figure it out. Just find some really smart guy, give him all your money, and then go to the beach.

Bill: Yeah, look, I guess the only reason that I reacted that way is, if I had the wealth that Charlie had, and I really don’t mean this disrespectfully– [crosstalk]

Tobias: You wouldn’t be [crosstalk] for Baba.

Bill: No, I would have spent more time with my children. My children would not know me as a guy that had a book in front of me all the time. That’s fundamentally not what I would do with my time. So, [crosstalk] rely on that guy– Okay, but that’s selfish. If you’re just walking around not paying attention to your kids doing what you want to do all the time, I don’t deem that great life advice. Now, did he pick up good nuggets? Sure. Might he be someone to learn from what he’s saying? Sure. I don’t know. What do you look at? Do you look at what people say or what they do? To me, I would live a different way.

Jake: The irony of that dichotomy of that false choice is that both of them are telling you the same lesson, which is to really think for yourself. Live your own life.

Bill: I would argue that both of them in their older age have argued to spend more time with your kids. Some of the irony of people praying at that altar and going to them to ask that question, they’re giving you the answer that’s not going to lead you to that altar, because you can’t spend that much more time with your family and get what they got, because they gave their entire life to it. But I just think there’s maybe other people outside of finance that you should go to for life advice like the homie, Oprah, or the home girl, I guess. Thanks for listening, O.

Jake: [chuckles]

Bill: O’s one of our few [crosstalk]

Tobias: Yeah. My concern on our feedback, you don’t want to talk deep value with me, sir. I’ve got to come on this.

Jake: Too bad. You’re not in the mood, you get in the mood.


Tobias: All right, amigos. This is fun. I think we’re on next week.

Bill: Next week is going to be tough for me but we’ll see.

Tobias: We might be prevailing on [crosstalk]

Jake: What’s Mike Mitchell doing?

Tobias: We might be prevailing on Mike. We’ll see. I just [crosstalk]

Jake: We need to look for updates.

Bill: Mike’s got board meetings. I don’t know if he can talk lumber anymore. He might be conflicted out.

Jake: Ah.

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