VALUE: After Hours (S03 E46): Crashless Generation; Value Spread; Heart Disease, Stress and Cortisol

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

  • The Crashless Generation
  • Absolute Value vs Relative Value Debate
  • Heart Disease, Stress and Cortisol
  • Growth Or Value. Which Is Harder to Buy?
  • Carnage For Last Year’s Market Darlings
  • Change Your Brain: Andrew Huberman
  • Value Spread Wider Than Ever
  • Capitalism Has Changed
  • EBIT Pinch For Growth Companies
  • Scarcity Has Never Lost Value
  • Buffett On Drawdowns
  • Share Cannibals Perform Well
  • Hussman Bearish On Valuation
  • A Lot Of Value Investors Are Closet Indexers
  • Corporate Debt Historic High
  • Global Venture Funding Hits All-Time High In First Half Of 2021

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: Do it. All right, this meeting is being live streamed, gentlemen. Just so, you’re aware in the state of California, this is now legal.

Jake: What?

Tobias: Now, you know.

Jake: I did not consent to–

Tobias: You got to click a button or something.

Jake: Yeah.

Tobias: What’s happening, fellas? It’s our 101st episode, the big one. It’s always tough to play on after the century, particularly in cricket. You go to sleep a little bit. Got to bat through, look for the second ton, the second hundred. Little bit of a wobble in the stock market over the Thanksgiving break. How’s everybody’s portfolio holding up?

Bill: Now, well, I own some value stocks.

Tobias: [laughs]

Jake: Getting more valuable every day.

Bill: I guess.

Tobias: Deeper value.

Bill: Yeah.

Tobias: Deep value getting deeper value. That’s going to be my topic, today. I always read Josh Wolfe at Lux Capital. I’ve been following Josh since he was Crain’s New York business. One of the 30, under 30 in like 2002 or 2003, something like that. Maybe, even earlier than that.

Jake: That’s what’s up.

Tobias: So, I read his letter whenever I can get my hands on Lux Q3 came out, I read it, some interesting lines.

Jake: Man of the stuff there, huh?

Tobias: Some interesting lines in that. I just want to quote a few of the pieces, and then Ryan Cohen of Alpha Architect. I think I mentioned this last week, I going to beat it twice in a row because I like it.

Jake: [laughs]

Tobias: What about you guys, what do you got going on?

Jake: Bill?

Bill: I don’t have anything. I’m going to do go find something.

Jake: [laughs]

Tobias: I’ll get a few topics. We can–

Bill: I mean, I figure, we’ll just talk.

Tobias: I think that [crosstalk] approach.

Bill: See how it goes.

Tobias: I think that’s a good idea.

Jake: Therapy.

Tobias: What about you, JT? What’s the word?

Jake: Yeah, I’m going to get out way, way over my skis in a-

Tobias: I love it.

Jake: -on a little segment that’s health related. So, we always make the caveat like, “This is not investment advice, right? This is definitely not health advice, but we’re going to get into some stuff that’s– I think it has some interesting facts to it, and also maybe some interesting takeaways so.

Tobias: I’m just going to give a bit of a shoutout to all the folks who have called in. So, we got Tulsa, Nairobi, Kenya, New Zealand, Picayune, Mississippi, Barcelona, Henderson, Toronto, Saskatchewan. Tell me if I’m saying that– and Townsville. There we go. Townsville was going to have the highest concentration of the value investors in the world. It is like 100,000 people there.

Jake: Yeah, that’s Graham and Doddsville on the map.

Tobias: I love seeing Townsville in the house. The town that wanted to tell everybody, it was a town twice, Townsville. Good for you guys.

Jake: [laughs] Redundant.

Bill: Either that or it’s just one guy that keeps signing on?

Tobias: Ah, there’s at least two.

Bill: Or a lady. I shouldn’t assume it’s all men.

Jake: No.

Tobias: Do a meet up. Well, according to the demographics, it’s almost certainly, oh man, it’s like 99.7%.

Bill: Yeah, that’s why I made some of the jokes.

Jake: So, you’re telling me there’s a chance.

Bill: Well, our one-woman listener or somebody using a woman avatar, which is more likely– [crosstalk]

Tobias: Yeah, got to be careful with those ones. There’s some catfishing going on the Twitter field.

Bill: I will seeing new catfish, yeah, that’s right. This is in the YouTube– [crosstalk]

Tobias: The first thing you got to do is right click and Google the image to see which– [crosstalk]

Bill: Stock image, it is?

Tobias: Yeah, stock image. It is. That’s it.

Bill: Yeah, no doubt. That’s a pro-tip right there, folks.

Tobias: Columbia, Central Valley. The other thing I do is, if I get hit up by a big account, the first thing I do is go and look at how many– what their follow up profile looks like because you see these guys 500,000 followers for the last three years drifting down slowly.

Jake: I’ll purchase then.

Tobias: Yeah, then they’ve bought the account and gone hard in the last week or so. I’m on to you. Just so, you know.

Bill: People sell accounts? I guess, I knew that.

Tobias: Of course, they did.

Bill: I guess, I knew that.

Jake: I’d sell mine–


Tobias: You have to get back into US to do that, wouldn’t you?

Jake: Oh, yeah. Has to be worth something first.

Tobias: Have you liberated your Twitter account yet? Or you’re just screwed, let it go.

Jake: What does that mean?

Tobias: Didn’t it get hacked or you just claiming that–

Jake: Oh, yeah.

Tobias: –there’s some unsavory tweet?

Jake: Yeah, exactly.

Tobias: [crosstalk]

Jake: Anyone’s that I get canceled for later, I was hacked during that time period.

Tobias: Yeah, if we ever get famous, you have to go and delete all that stuff. That’s the first thing you do. And you need a buddy who’s just going to go and delete all of your Twitter history and browsing history after you die.

Jake: That’s good. Ooh, smart.

Tobias: Just blow the computer up, just vaporize the lot.

Jake: Bring it all down.

Tobias: [laughs] Should we kick off with– Someone’s claiming Kathmandu, Cody, Wyoming. Dickinson, North Dakota. This is pretty good– This is a pretty good spread.

Jake: It’s not bad.

Tobias: I just wanted to– Do you guys mind if I take it away?

Jake: Yeah, please.

Tobias: I like to say that– [crosstalk]

Bill: No, I’m hoping that somebody will carry it for me.

The Crashless Generation

Tobias: I like this quote from– This is from Josh Wolfe. “An entire generation has not seen a downturn, has not experienced widespread loss from widespread leverage across sprawling interconnect systems, has not run back to safe haven occupations or embraced terms of value investing or timeless classics, warming of rampant speculation of devils taking the hindmost, or of the madness and delusions of crowds. Jonathan Swift said, reason is a very light rider, and easily shook off.” One, I just loved that paragraph. I thought that was a–

Jake: It’s like checking all your boxes.

Tobias: That was a shit hot paragraph, isn’t that?

Jake: [laughs]

Tobias: I really enjoyed reading that. So, thanks for that Josh. And I couldn’t agree more. I say this to you guys offline regularly, I may have said this on a podcast before, but I do think that there’s– you could be 35 now, I’ve started at 22 in this business, and not seen a real grinding bear market, which is amazing. You’d be PM at 35 and not have seen– We’ve seen flash crashes, we saw March 2020 flash crash. There’s been lots of like– December 2018, they’ve been lots and I freely admit that I thought every single one was going to turn into a bear market, because my investing experience has been, I saw the dotcom bust, and I saw the little short run up, and then I saw 2007, 2009 bust. So, Seth Klarman has a line where he says like, “You’re basically a product of the market that you come into,” and that’s certainly true for me. So, I probably see more bear markets than there are in actuality when I predict more than there are– I’ve predicted 14 of the last zero. So, feel free to ignore me. I’m not predicting anything. Again, I’ve partially learnt my lesson. Actually, I have got a little, I have got a little– you know, if you can see this. I’ve got a little crystal ball here.

Jake: Ooh.

Bill: Mm.

Tobias: My kids and you can actually ask it a question, and press a button, and it’ll give you a response so.

Jake: What ending are we in? Push the button.

Tobias: Well, you got to ask it like a little open end like, is this a big bear market coming? Oh, you joking? You’re not going to work for me? Here we go.

Device: Definitely.

Tobias: Definitely. There you go.

Bill: Oh, shit.

Jake: Oh.

Bill: [crosstalk] put it on the board.

Tobias: If that is a reflecting of the market though, you’re going to want to sell puts. [crosstalk] everybody else who want to buy [crosstalk]

Tobias: That’s my entire investment process. [laughs]

Bill: I like it.

Tobias: The real bear market, when we finally see one, which we will eventually, they’re inevitable. I’m not predicting one at all. But the real bear market, the thing that characterizes a real bear market as opposed to a flash crash or crash is this thing where you get all the rallies gets sold, and it just goes on and on and on until you’re 15, 16, 17, 18 rallies [unintelligible [00:08:09] a lower low. That happens. You can go back and have a look at it. It’s sickening. Say that again?

Jake: Buy the dips.

Tobias: Buy the dips. Yeah, you’re going to get a lot of opportunities to buy the dips. No need to shoot your bolt early on. I don’t know what the market is going to do here. I just think that– you know the way that you would see these things start is that, you often have the latest get smashed to pieces which we’ve seen like the ARKK complex of all. You know the Charlie Bilello tweet that does– has been doing the rounds like– There’re some of those stocks already of 85%, something like that, and they’re still expensive at that kind of level. Peloton’s one. There you go.

Jake: Oh.

Tobias: Alibaba, I don’t know. We’ve talked about that a few times.

Jake: You’re back to like, 2017, right now, Alibaba price?

Tobias: It can be a lot of that, right?

Jake: Yeah. It could be a fair amount of that.

Hussman Bearish On Valuation

Tobias: It’s kind of fashionable to hate on John Hussman, but one of the things that I’ve learned from Hussman is, when you look at–

Bill: It’s not that fashionable. I mean his returns are the things that make people hate on him to be fair.

Tobias: It’s the hedge. As he’s pointed out, [crosstalk] hit the smashing bits.

Bill: Okay, but that’s like a big part. That’s like if I didn’t need a whole lot of pizza, I wouldn’t be fat. Well, you ate the pizza, you are fat.

Tobias: If you’ll mandate, I mean, what you say that you’re going to do is to like hedge up the portfolio, you kind of get what you get, right? If you’ve run a hedged up and he’s delivering what he says he’s going to do, that’s what it does to the portfolio. Just ignoring that part.

Bill: I’m just saying, that’s why the hate is there, objectively.

Tobias: I think it’s because he’s bearish on valuation basis.

Bill: Maybe, I think a lot of it has to do with the hedge. I think if you’re bearish on valuation and your performance is roughly in line, then people don’t hate on you. I think if you’re bearish on valuation and you need the stock market to go down like 50% to catch up to it, then people will start to say– [crosstalk]

Tobias: But here’s the thing. That was literally– that’s the point I was just about to make. You can go back and read those letters for a long period of time and you can see what he was saying. Every single time that we’ve had these crashes, the crash in 2000 took you back to like 1996, and the 2007 crash, took you back to like, 1996, 1997. It’s entirely possible that we have a crash that takes you all the way back. Like you haven’t missed anything by not being involved in it because you– [crosstalk]

Bill: Just like Buffett says. “Don’t invest and wait for crashes.”

Tobias: [laughs]

Bill: I mean, this is the problem with that strategy, right?

Tobias: I’m not endorsing strategy.

Bill: I know, you are not. I’m just saying, this is what people hate on, right? Because it’s like, I think that line of thinking, one, not only requires calling a crash correctly, but also requires moving incorrectly or moving in correctly.

Tobias: Yes, impossible.

Bill: And like, “Okay, if you can do it, good luck.” I think, that’s at least why I would never do that for myself.

Buffett On Drawdowns

Tobias: That’s fair. I prefer Buffett’s approach to it too, for what it’s worth, just that you’re going to get crashes, you’re going to get a big 50% drawdown, and you’re just going to get smacked in the face, and there’s nothing you can do about it, and if you can’t handle a 50% drawdown which Munger and Buffett have both said, you don’t belong in the market, which means, look at how much leverage you’re carrying. If you can’t wear it, then you shouldn’t be in here because it’s unpredictable. It’s completely unpredictable. And I do think that Buffett’s great superpower has just been being super optimistic about the US, and about US business, and being largely, fully invested most of the time. To the extent that he can be like, he’s got that flood of cash coming in all the time that he has to redeploy that. Clearly, he waits until he gets the thing that he’s looking for, which is why he’s sitting on so much now. $150 billion or something?

Bill: Yeah.

Tobias: It’s the better way to live.

Bill: I don’t know. I’m a simple person. I don’t own this but I’ve been thinking about owning British American Tobacco. If you think a crash is coming, your dividend yield is 8.9%, you’re going to get that. People are going to smoke, and smokeless products are going to grow, and I just think if you’re waiting for more, then wait for more. But there’s stuff out there to do. That said, I’m sure you get– I’m sure they’ll kick you in the face.

Tobias: I think that’s the way to do it. You wait until you get your price like you will get whatever expected return you want. You wait until you get it and then you take it. If it proceeds on to get cheaper after that, then you know, bad luck or buy some more. Don’t worry about it too much. But just wait until you get your price.

Bill: Easier said than done, but yes.

Tobias: Yeah, but you can do it. You can just say, I’m not going to take a return below x, and then if you’re just disciplined about it, you can do it.

Bill: Yeah. I guess, what I’m saying is, it’s easier to say that you just watch it drift lower and don’t care.

Tobias: I’m not saying, you don’t care.

Bill: Yeah.

Tobias: I’m saying you just beat yourself up about it the entire way down.

Bill: Yeah.

Tobias: But you don’t do anything about it. Don’t trade it.

Jake: Like you just, every morning, get up and run that calculation, especially, if they’re doing buybacks on why it makes sense for this to go lower for me to be or have a better outcome.

Tobias: Well, the expected return goes up as it goes lower provided that you’re right on the underlying business. And then your measuring stick is like the next quarterly report and the one after that, and the one after that, and the K, and not what the stock price does in the interim. It’s easier said than done.

Bill: Yeah. I think, that’s right.

Jake: Off theory. [laughs]

Absolute Value vs Relative Value Debate

Tobias: One of the things that Alpha Architect has pointed out as Ryan Cohen’s work, I think, I mentioned this last week, but he says that, when he’s measuring it on EBIT total enterprise value, which is my acquirers multiple symmetric I like, the market is– the valley decile relative to the market has had a wider spread now than it was a year ago? On some different measures, there’s price to book, price to sales. But I think they track the price to cash flow and price to earnings as well. The spread now is wider than it was in 2000. That’s why value sucks so hard for so long. But it also means that the opportunity in value is pretty solid. Anybody want to dive on that grenade?

Jake: Wow. We’ve had this conversation already about– [crosstalk]

Tobias: We have this conversation every week. It’s my favorite topic.

Jake: Relative versus absolute. [laughs]

Bill: Well, I guess, with the absolute thing, I just don’t know why with all this money you’re ever going to– you don’t really deserve high absolute valuations in my opinion with this much money around. Because really all that money is doing is competing for an asset, then there’s a ton of money out there. So, why would absolute valuations be up there? With the amount of people that have gone into finance like, I don’t think setting your mind to historical absolute valuation makes a whole lot of sense.

Tobias: How are you calculating absolute valuation? Because I think it’s tough. Like you got to look at the 10-year, you got to look at other things. How do you think about it?

Bill: I just think you’d take what’s out there. You can sit there, and you can be the guy that shouts at the sky screaming about, “I need 10%,” but no one gives a shit what you need.

Tobias: I mean, Buffett’s been dying– To be fair, that’s literally his numbers isn’t–

Bill: Okay, but I do think and I’m going to–

Jake: Literally.

Bill: What I’m about to say, people are going to say like, “Okay, well, you just said that you eat all the pizza and you are fat. So, you’re fat or whatever.” Buffett needed Apple to keep up with the S&P. That is a big, big thing to ask of somebody all the time to recreate possibly the best investment of all time and have that be the strategy that you’re the guy that can shout at this guy, “I need this return and say, well, Buffett did it.” Well, Buffett, A, is way better than you, and B, he had like the best investment ever and required that to keep up. So, is that a good strategy for real or did it work out because he’s a genius?

Tobias: Yeah, I think, that he’s approaching the problem in a little bit different way. He’s not thinking, “How do I keep up with the S&P 500? He is thinking what big deployment of capital generates a sufficient return for me, regardless of what’s happening? He just takes them when he gets them.

Bill: I approach it like I am an idiot, and I have the market offering me things to buy, and what do I want to buy within what I can buy. You know what, if we all crash, I hope, I don’t lose relative wealth, because I don’t think paper wealth even means anything. Unless you’re trying to really have a step up in your purchasing power, which I’m really not. I’m trying to gain wealth over time.

Jake: Well, what happened to that jet, money talk?

Tobias: [laughs]

Bill: Well, I said for the right risk. I would risk it for a jet.

Jake: Okay.

Bill: But that risk isn’t out there right now.

Tobias: A good comment here from Bo Banks. He says, “Part of the reason EV/EBIT spread is greater is because the value bucket is much less levered than most times in history. Average net debt EBITDA multiple for the bucket is less than 40.

Bill: Nah, I don’t buy that.

Tobias: Yeah.

Bill: It’s not like these growthy entities are super levered.

Tobias: Yeah.

Bill: I don’t think you can say levered is the reason.

Tobias: I saw a chat yesterday that said that–

Corporate Debt Historic High

Jake: Corporate debt is at like historic high.

Bill: Okay, but I bet it doesn’t skew on growth. Everybody– All that people bitch about his stock-based compensation on growth. Growth, it probably has the most pristine balance sheet out there.

Tobias: That’s probably fair. I saw the chat yesterday, it said that, this is from some macro guy I’m sorry I missed the account when it came through, but it had the return on equity for the growth against the return on equity for value, and then the valuation multiples of the two and basically, they’ve tracked. So, they are better businesses.

Bill: Yeah. That makes more sense. A return on invested capital framework is what I think the answer to this problem is. Now, whether or not it mean reverts and whether or not it’s regulatory capture, those are different questions. But I do you think, these growthy businesses are pretty good businesses. At least the ones that have high multiples on average.

Tobias: Sure.

Jake: Toby, you’re missing the best stat out of that Josh Wolfe letter, which is-

Tobias: Hit me.

Global Venture Funding Hits All-Time High In First Half Of 2021

Jake: -Q3, I might be a little off on this, but Q3, 2021, the amount of money deployed in venture capital was more than like 96 through 99 total. So, cumulative money deployed in venture capital in one quarter.

Bill: Yeah, that makes sense.

Jake: [laughs] That makes sense?

Bill: Why would it not?

Jake: It’s a ton of money.

Bill: Okay, but one, there’s a ton more money out there, and two, alternatives as an asset class are way more colloquial or whatever like institutions own them. Also like where the fuck are you going to get yield?

Jake: Wow.

Tobias: British American Tobacco.

Jake: Yeah, exactly.

Bill: Yeah, that’s right. That could be the answer. That doesn’t shock me that VC is a class as– If we want to make the argument that you shouldn’t go into venture capital, fine, that’s a different argument. But I’m not shocked about the deployment of capital.

Jake: I think, I’m saying typically when you have a very large influx of capital chasing any particular strategy or idea, the forward prospective returns are lower.

Tobias: Yeah, they are lower.

A Lot Of Value Investors Are Closet Indexers

Bill: Yeah, but that’s everywhere. That’s my point. This is why Charlie’s said like– [crosstalk]

Tobias: Not in value [unintelligible [00:20:26]. [laughs]

Bill: Yeah, but it’s not like value is this undiscovered concept.

Tobias: No.

Bill: It may be out of favor. I don’t deny that. But I truly believe a lot of value guys are just like closet indexers or shittier businesses. I really do think that–

Tobias: How dare you.

Bill: I’m not saying you, man. I’ve said it lot of times.

Tobias: Of course, I didn’t take it as me, mate.

Bill: Yeah, but I really do. I think that they hide under like this, “Well, we’re value” and it’s like, okay, but you own dogshit.

Tobias: The thing is though, like, I understand why that happens so. Because it’s a handicapping, like you have to get– I was saying to Jake before we started like, I don’t want to keep on dunking on ARKK because I like Cathie wouldn’t know like, what she’s achieved. But I look at the portfolio regularly. I can just pull the portfolio down in a little valuation tool that I have and look at the expected return ignoring what happens in the multiples. At the peak when she was like, when ARKK, A-R-K-K was at 156 bucks. I thought the expected return there across the portfolio was a little bit north of 4%. Now, it’s like 150– [crosstalk]

Jake: That’s assuming what to the multiple.

Tobias: Yeah, sorry. That’s assuming no compression in the multiples, which were at a very, very significant premium to the rest of her index, whatever that is. I think it was the Qs. I think it was the NASDAQ index. Then, I looked at it again this morning with a stock at $106, and I think the expected return is like 7%, still assuming that no compression in the multiples. There’s still with a premium. I’m trying to do the reverse of that. I’m trying to get a high expected return at a discount to the rest of the index. If you’re doing that, you’re forced into these things that are out of favor, and they’re less good businesses. I know they’re less good businesses, I’ve just not going to pay a heroic multiple, so, I can own good businesses. That’s been a problem, you know, last five or six years.

Jake: Mm-hmm.

Bill: Yeah, I guess I agree with you. I would just– I don’t know, everything depends on nuance and definitions. Is heroic multiple, a 25% free cash flow yield. If you’re going to hold a good business for six years, what is that multiple really bleed down to? Are we talking– [crosstalk]

Tobias: 25% free cash flow yields for a good business? What’s it called?

Bill: No, no. 25 times, 25 times, 25 times.

Jake: Oh, 4%.

Bill: 4% free cash flow yield. Sorry. I didn’t mean to misspeak. What are we going to go to, six? A good business is not trading at eight or 10. No fucking way.

Tobias: But it would depend on– you would look at is it paying a dividend? Probably not. It’s probably reinvesting all of it? What rates of reinvesting it? Probably pretty high rate. Then you could get– your expected return is going to be higher than– It’s probably pretty reasonable expected return that, like we’re talking about Google, Microsoft, Facebook, we’re in that kind of range there and I agree with you. You could be a value guy and hold all of those. Probably, not buy them here but you could certainly still be holding them for when you bought them at opportune moments over the last five years, even over the last year.

Growth Or Value. Which Is Harder to Buy? 

Bill: I think you could buy him here with a long enough time horizon. I totally agree that you could have a drawdown and I could be totally wrong. But I think a much more dangerous game is going down in quality chasing a multiple than it is like trading. I want to be very careful because I’m a Toby’s program, and I want to be very clear that like– [crosstalk]

Tobias: I’m happy to talk about. Let’s go for it. I’m not going to be offended by it.

Bill: I know. But what I like about what you do is, it systematizes. So, the thing that makes sense to me about value is, you’re exploiting a behavioral bias, right? You’re saying the market hates this too much, and I’m the one that can exploit it. It makes sense to me to outsource exploiting behavior to a machine. To be the person that wants to exploit that, I think is a tough thing for me to fully buy any more than I buy that people can analyze businesses and pick a winning business and hold it for the really long term.

Tobias: Yeah. You got two issues, right? So, if you’re explicitly a high growth, high-quality investor with value as a secondary consideration or no consideration at all, the risk that you run is that the business becomes less good over time and warrants less of a multiple. That’s how you won’t subpar returns. To be playing that game, you have to be an absolute demon at analyzing businesses. It’s very, very tough because every other capitalist in the world is trying to figure out how to get those kinds of returns, and they’re going to attack that little area.

On the other hand, if you’re going to be deep value, what you have to do is, you know, what you’re saying is this business isn’t going to deteriorate as fast as the rest of the market thinks. I do think you can find these occasions where basically, the market is saying, “This business is not going to ever grow again or it’s going to continue shrinking forever.” The outside view of it is, it’s a little bit more cyclical than that, there are going to be exits from this industry, this thing can survive, this thing can do a little bit better than that. In my personal opinion, that’s an easier assessment than doing the good business remaining good for a very long period of time. I think that’s a really difficult thing to do. But that has been paid better over the last five or six years.

Bill: Yeah, I guess, where I probably disagree is that, I don’t think the latter is any easier than the former. I think the latter may– you may get bailed out more by multiple. I think it may be– studies have shown value’s a better pond the fish in, but I don’t think that that’s any easier of a game at all. I think they both are really, really hard.

Tobias: I agree. There’s no easy trade. There’s no easy spot. They’re both difficult. I just think that the more conservative approach is a little bit easier. But then we have gone through this unusual period too, where there is this very that Marc Andreessen quote about software eating the world, that does seem to be coming true. And when these software star businesses move into some of these older style industries, the older style industries get destroyed, get knackered by when that happens. So, I think that just focusing on the cheapness of the business with no view of what is happening competitively in the industry is a mistake and it’s one that I’ve made lots of times. But I do think it– [crosstalk]

Jake: It’s kind of second-order question of that though of, In a world where we turn up the coefficient of change going forward, which gets harder? Does it get harder to know about the good businesses and what they’re going to look like and continue to look like or does it get harder to untangle secular versus cyclical problems with a business that may or may not mean revert now?

Tobias: Yeah. Will creative destructive insurgent be itself disrupted in short order. So, do they warrant those very high multiples? Those are virtually impossible questions to answer. But I have to– [crosstalk]

Capitalism Has Changed

Bill: I think where I’m at is I don’t actually believe that capitalism is working that way anymore.

Tobias: Like the network effects mean that they’re just going to be bigger winners who just run away and there’s going to be one.

Bill: I think you’ve got industry consolidation. I think you’ve got regulatory capture. I don’t fundamentally– I think that the assumption that– I don’t know. I’ve seen two things since I was born and maybe it’s because it’s just one big interest rate environment, I don’t know. But the big have gotten bigger and scarce assets have accrued more value over time. If you had bought beachfront property at any point in my life, you’ve done pretty damn well if you had a long-time horizon. Really, really great stocks like truly great. This doesn’t mean that you can go out and be like, “Oh, this is a great business.” No, fuck that. There’re maybe hundreds of them in the world they’ve done well. You can’t buy it and never look at it, you got to know what you’re looking for, I don’t know how to do it necessarily, but I also don’t know how to analyze energy companies, right? Then somebody can say, “Well, why not index?” I mean, you can index. I’m not going to hate you for it. I just don’t trust it.

Tobias: Can’t disagree with any of that.

Jake: It’s tough game.

Scarcity Has Never Lost Value

Bill: But I do like scarcity has never lost value since I’ve been alive and it’s just hard for me to ignore. Now, is it overperforming right now? Yeah, maybe, probably. But if you got a 10, 20-year time horizon, I don’t really want to flip C class assets for the rest of my life.

Tobias: It’s been a pretty good year for value, though. Most value guys I think have had a pretty good year and I think most growth guys have had a pretty rough year. I kind of think that the change has already happened or underway, which is– The reason I keep on bringing up the Kirlin blog post of Architect because the spread, it feels to me like value has been working for since September last year, and certainly, since the beginning of this year. And yet the valuation spreads are still very wide. I don’t know what that’s measuring. I don’t know where that is coming from. I don’t know what’s driving. I mean, it’s clear the expensive side is driving it, but I don’t know.

Carnage For Last Year’s Market Darlings 

When I look at the anecdotal stuff like the Charlie Bilello tweet that comes around. There’s some carnage in there and it’s all the darlings from last year Zoom, and Peloton, and all that sort of stuff.

Bill: Yeah, dude, I don’t know. Qurate hasn’t been fun.

Tobias: [crosstalk]

Bill: I don’t know. My style box according to– Yeah, but my fucking portfolio isn’t like–

Tobias: Yeah, it is.

Bill: I am apparently a slightly higher than mid cap, middle valuation person. I will tell you I’ve been getting ass holed by both camps lately.

Jake: [laughs]

Tobias: Well, Morningstar puts me–

Jake: Finger cuffed?

Bill: Yeah. [crosstalk]

Tobias: Morningstar puts me in this like, it’s mid cap, large cap value. My little, whatever you call it that circle, like it’s the exact wrong shape for all the stuff that’s been working just like a different angle and a different spot like large cap growth is what you want it to be. Mid cap value has been rough. But that’s not always the case. Mid cap value is a pretty good spot to be for the most part or has been traditionally.

Bill: Yeah. I’m not trying to hate on any one strategy or whatever.

Tobias: Hate on all of them. That’s equal opportunity hate.

Bill: Yeah, I guess, just my only strong opinion is, sometimes, I have in the past been like, “Well, the multiple justifies this,” and I’ve just never found that to be a valid thought that I get paid on.

Tobias: It’s a shitty business, but it’s an even worse multiple.

Bill: Yeah, that’s right. It’s just never, ever, ever worked out.

Tobias: To be fair, though, we have been in this very, very extended growthy kind of market. Anyway, close to the peak, right? I don’t mean, we’re close to the peak. Sorry. I’m not calling the end of it. I’m just saying– [crosstalk]

Bill: Yeah, I know what you are saying.

Value Spread Wider Than Ever

Tobias: The spread is wider than it has been. So, of course, if you look at that and you look back and say, “Well, the thing that’s worked was one thing and the thing that didn’t work is the other thing, and so therefore it’s wrong.” But, again, John Hussman always says, “Look at these things full cycle trough-to-trough or peak-to-peak and that’s the measure and we haven’t had that second leg to properly make the assessment yet.” Buffett’s great line about, “When the tide goes out, you find out who’s been swimming naked” like we get to find out at some point here, who’s been swimming naked.

Jake: I’m just looking, am I wearing pants today?

Tobias: Oh, you got to go commando.

Jake: Okay. Well, just thinking through that almost definitionally right, if you’re looking at EV to EBIT, and the spread of EV has gone, call it favorably or maybe unfavorably depending on if you owned or not, and you’re– otherwise you’ve had a good year from a value kind of guy perspective as you’re proposing then that means that, that EBIT must have moved in a way that is good. Is that possible?

Tobias: Yeah.

Jake: EBIT of the company’s underlying this, perhaps have improved from a year ago, which would then.

Bill: Well, yeah, because a lot of those companies were shut down last year.

Jake: Right.

Bill: I’d like to see it on 2019 numbers, but I bet it’s the same.

Tobias: You know what I find kind of interesting is, most of the companies that I look at– this is the company that I look at, so, I don’t know if this is representative. But most of the stuff that I look at is cheap, they’ve all had bad 2019. Like they’ve lost money in 2019. I don’t know why that is. I’m trying to work out if it’s a reporting period. I can’t visualize it every single time, but I’m surprised every single one of these had a bad 2019 and then they’ve had a blockbuster 2020.

Bill: Yeah, COVID winners, people think are going to be losers because they’re in secular decline.

Tobias: Yeah, I think that’s what’s happened. Some of them are just, they’re not in secular decline. They’re just slow growing businesses that like really, really slow like, 0.6% over the last 20 years or something like that– 0.6% compound over the last 20 years is fine [laughs] but it’s cheap.

Jake: Yeah. Sean Stannard-Stockton’s written about that, “That’s a tough pond to fish in.” Maybe as a basket it’s not. But as like a picker, I think, that’s a tough pond. 0.6% can go negative quick.

Tobias: Oh, no, no, no. This is a cyclical. This could easily go the wrong way. What’s Sean basing that statistical error is that like– [crosstalk]

Bill: Oh, I don’t know– I don’t know what his approach was when he wrapped [crosstalk] it.

Tobias: I do like this stuff.

Bill: Yeah, he’s just like– [crosstalk]

Tobias: I think it’s very well reasoned.

Bill: Yeah.

Tobias: Yeah, very smart.

Bill: Agreed.

Tobias: It’s very, very hard to look at prospectively from here and know what’s going to win. But I can look at my own portfolio and I can see what– My estimated expected return for the portfolio, I think justifies the position by– It clears my own personal hurdle. It’s at a discount to the rest of the market on every single multiple. So, I feel like the two things that can happen. Either, I expand up to the market, in which case, that’s great. I don’t think that’s really going to happen. I think that probably what’s going to happen is the market is going to come back.

Jake: Catch down, do you?

EBIT Pinch For Growth Companies

Tobias: Catch down. Unfortunately, but you still get the expected return like you should still generate. You still over enough three to five years like, I don’t know what happens in the interim, but three to five years of compounding at this rate, I feel pretty good about. If the growth guys win over that period of time, good luck to them. I wish them all the best. I’m happy doing what I’m doing.

Bill: I think the other thing that’s happened with EBIT is the change to subscription objectively reduces your revenues. I wonder if the amount of multiples, like the amount of money that has been heaped on revenue multiples is– Well, I’m almost certain this is the case, has just driven a lot of expensing in a big way of sales forces and trying to get installed bases, and then you’ve got the subscription revenue has to build over time. It doesn’t come out of the gate as much. So, I’d like to see what the world looks like in a normalized expense environment. But then again, it’s probably [crosstalk] a recession–

Jake: You’d say then for the growthier companies that EBIT is pinched right now, because of that?

Bill: Yeah. I mean, that’s definitely what the market’s implying.

Jake: Yeah, I think accounting probably has some catching up to do on that front, potentially.

Bill: It was also just the way it works. Like the cash flow statements aren’t– A lot of these companies are not generating a ton of cash flow x stock base comp, but if you’re paying a guy or gal to go out and sell, but it takes four years to recoup, that’s just there’s a mismatch in your revenue expense line. Can you ever turn it off? I don’t know. That’s the question, right?

Spotify Overinvesting In Growth

Tobias: Do you think that among managers, there’s more of a recognition that that sort of Buffett style approach where, you know, the way that buffet manages Berkshire and compensates them, that’s the heads of those companies? I saw Dan Ek tweeted this morning or yesterday something. He’s the Spotify CEO, he has tweeted that, over investing in growth because he looks at cash flow, the cash flow positive. They’re over investing in growth because they think that they can win that little race. So, that’s going to depress current earnings, current free cash flow, all those things. Do you think that that’s more prevalent now and so some of those metrics like if you’re investing on that basis, then you’re going to miss and your free cash flow is what you’re eyeballing, then you’re going to miss some of those opportunities?

Bill: 100%. Because the market doesn’t give a shit if you don’t print current cash flow. They care about what are you doing to your strategic position. So, why would you not spend like crazy? Whether or not, you can then like shrink it in and right size your organization without losing culture, that I think is a very valid discussion. But I almost think most expenses are just treated as one time in people’s minds. I know that that’s a little bit too far of a statement, but I do think a lot of people are like, “Whatever, go spend.” Because you got people’s ear, go win the year, like win the whole thing? Because if you do, you got global scale.

Jake: Do you think the execution of that is priced into most of the prices of these things today?

Tobias: Yeah. [crosstalk].

Bill: I don’t know. Yeah. A lot of it is.

Jake: It’s already won. We’ve won. [laughs]

Bill: Well-

Tobias: Maybe, true.

Bill: -I would’ve been saying the same thing in 2018. So, I’ve been wrong.

Tobias: I don’t think that holds you back. Never held me back.

Jake: Yeah.

Bill: I guess, what I really think is like, I interviewed David Gardner, and that just dropped, and I just think that, we’re coming through a period where people that have bet on the future are one huge and people that have bet against it have lost in a big, big way. Maybe that changes but maybe it doesn’t.

Tobias: Well, then, more recently, it’s been profitable to bet against it the last 12 months– [crosstalk]

Bill: All depends on when, right? I mean, even Peloton is still up- [crosstalk]

Tobias: Last 12 months.

Bill: -80%, right in 18 months, so.

Tobias: Yeah [crosstalk].

Bill: We’re going to say, we have a 10-year time horizon, it’s hard to like catch a chart and be like, see we were right here but not there. So, I don’t know.

Share Cannibals Perform Well

Tobias: Somebody asked about a quantitative study of the biggest share cannibals and how they performed over time. Yeah, if you’re buying back material amounts of stock that indicates you got the free cash flow to do the buyback, it got a management that’s willing to do it, and the stock price is at a sufficiently, you know, the market capitalization is low enough relative to the business, it’s probably value, and when you get all those three things together, you get very good returns. You can divide the universe into share price– into stock issuers and stock cannibals, and the cannibals, they’re so much better than the issuers quantitatively speaking as a cohort. JT, you want to do your–?

Heart Disease, Stress and Cortisol

Jake: Yes. What is the leading cause of death in the world?

Tobias: Malaria.

Bill: Fatness.

Jake: No, I’m sorry.

Tobias: Old age.

Jake: Cardiovascular disease.

Tobias: No way.

Jake: 18 million people in 2019 died. 32% of all deaths are cardiovascular disease.

Bill: How correlated is this with being overweight?

Jake: Slowdown, slowdown.

Tobias: [laughs]

Jake: We’ll get into that.

Bill: I’m just saying. I’m listening to too much Rogan. I’m sorry, man.

Jake: Yeah. Every 36 seconds someone in the US dies from cardiovascular disease.

Tobias: Is that old age?

Jake: Well–

Tobias: Sorry, dude. You just keep on doing your thing. I’ll write down a few questions to ask you, again.

Jake: Yeah, of course. [laughs]

Bill: Yeah, we got this, Toby.

Tobias: [laughs]

Bill: [laughs]

Jake: Yeah, you guys are really helping [crosstalk]

Tobias: We’re peer reviewing you in the moment. [laughs]

Jake: Yeah.

Bill: I’m just saying.

Jake: Oh, so, post-World War II, there was the sudden explosion of people dying from heart attacks. It was like 1 million people a year were dying in the US from heart attacks. It was like a 10 to one ratio of men to women. So, it’s a real problem then because they want to figure it out. No one knew why, and we had no explanation, and into that vacuum, stepped this man named Ancel Keys, and his claim to fame was actually inventing the K-ration which I believe that the K is for Keys, which was a military like what set to soldiers to eat during the war. Keys became really famous for his hypothesis that it was cholesterol that was causing all of this cardiovascular disease that was killing 1 million people, you know, hundreds of thousands of men a year dying from this.

Tobias: This is dying before, this is like a dying before their time?

Jake: Well, I guess, everyone’s time is their time, but yeah, statistically–

Tobias: Die before your cohort’s time.

Jake: Yeah. Right.

Tobias: Okay.

Jake: I mean, to the point where this guy is on the cover of Time magazine, like he’s a big deal. His hypothesis was that saturated fats were the problem, that we’re eating too many saturated fats and causing heart disease, there’s too much cholesterol floating around in your blood. Well, there’s only one little problem with that. The science never said this. There was no randomized control trial, which is the gold standard for figuring out like, it does something cause something else. Never proven. In fact, it’s worse than that.

In 1968, Keys himself did a study where they substituted, they had like two cohorts. And in one of the cohorts, they substituted the saturated fat with something else that was supposed to be more heart healthy.

Tobias: Is that unsaturated fat?

Jake: Well, no, it was some other like, actually vegetable-based fats, which– [crosstalk]

Bill: Dude, fake news does.

Jake: He did.

Bill: A lot of it going around.

Jake: Five years, they ran this study, and it never came out, and no one knew anything about it, and until 2013, somewhat like was digging through the basement in some, I don’t know where it was, like some university. And uncovered the data for this, digs into it, it turns out they basically just buried the study, because it showed–

Tobias: Wrong answer.

Jake: It was the wrong answer. It showed that there was no correlation between anything like any– and in fact, it was actually negative, like, a 1% increase in cholesterol actually could made a 1% decrease in mortality. So, they just basically like, “Well, shit, this isn’t giving us the answer that we wanted, throw that in the garbage.” It’s pretty bad, like Keys actually smeared other researchers who would say like, “Hey, I’m doing some things. I found like sugar actually might be a problem.”

In fact, there’s Dr. Yudkin who proposed that maybe sugar had some ill health effects and Keys went after him. Even worse, there’s this other guy, this professor Kilmer McCully was his name. He’s a Harvard researcher who was just kind of innocently looking at this link between homocysteine and arteriosclerosis in children, and there was this weird linkage like where higher homocysteine levels lead to like, what looked like old people like their arteriosclerosis in some children through some birth defects or some genetic defects. It’s like, he’s just publishing along doing this research, kind of minding his own business, and the fact that it got close enough to calling into question the cholesterol hypothesis, they shut him down, canceled him, kicked him out of Harvard, took all his funding away. And even, when he went to go interview at other places years later to try to get a job, they would call ahead and blacklist him.

This is like, it’s religious type of– level of [laughs] like the earth is flat kind of thinking. There’s a little bit of reason for this. So, the sugar research foundation promoted fat in the studies as is like trying to make it the culprit in all of this stuff. There were these two brothers by the last name of Kellogg, who happened to invent this thing called cornflakes, and it turns out that they were Seventh-day Adventist, was a big part of their lives. Part of the Seventh-day Adventist prescription for being in that religion is to mostly eat like vegetables and grains. So, you have literally money and religion pushing on this cholesterol hypothesis and supporting the research for it.

Then on top of all that, you have the statin industry, which in the last, call it 40 years has been literally like $1 trillion worth of revenue has gone to the statin industry. They’ve put everyone on statins, basically. So, I’m not going to go all like crazy conspiracy theory on this.

Tobias: Go ahead.

Bill: Yeah, go ahead. Let’s do this.

How To Lower Heart Disease

Jake: You kind of have to say like Munger’s incentives would tell you like, “Boy, who stands to win, who stands to lose in this, and why do people behave in certain ways?” So, cardiovascular disease, I think, there’s probably some question marks around like how we ended up with the dietary guidelines that we’ve had for the last 40 years as a way of trying to be “heart healthy?” Well, I want to pivot this a little bit into–

In the early 1900s, there was this community that lived in southern Italy, in this town called Roseto. And a bunch of them for whatever reason decided to all move to the US together, and they started another town called Roseto in Pennsylvania. They all live together in this little community. What’s crazy is that, for some reason, they had half of the rate of cardiovascular disease compared to everyone around them. What’s going on? Like any guesses as to why that is? Maybe that a diet–

Tobias: Lots of olive oil.

Jake: Lots of olive oil.

Tobias: Lots of fish.

Jake: Potential.

Bill: I was going to say fish and exercise.

Jake: I was going to say like Mediterranean diets what might be one answer. Exercise–

Bill: Maybe they’re walking a lot. Yeah.

Jake: Okay.

Bill: Maybe they don’t have a lot of stress.

Tobias: Genetic.

Bill: Yeah, maybe it’s genes. What else do we have, Toby? Let’s throw it out here.

Tobias: Eggs. They like eggs.

Jake: Eggs.

Bill: Yeah.

Jake: All right. So, most of your answers are wrong.

Bill: Definitely egg.

Tobias: Lot stress, lot stress. Wrong?

Bill: Okay. They had constant diarrhea. Try that one. [crosstalk]

Jake: So, they smoked unfiltered stogies, “they drank wine with Abandon.”

Tobias: Sounds like fun place.

Bill: That’s where I’m going if value keeps going like this.

Jake: That’s right. They skip the Mediterranean diet in favor of meatballs, and sausages, and salami, and cheese.

Tobias: Legends.

Bill: Good for them. They got sun on their genitals, I bet.

Tobias: Sunny balls.

Jake: That might be part of it. Did they have easier jobs? No. It turns out most of the men worked in this slate quarry, where there was like noxious gases, and dusts, and all kinds of stuff. But you guys already, you did hit on what it was. And the answer is actually that, they had lower stress because they lived in a cohesive community where there wasn’t much Keeping Up with The Joneses because everyone lived in the same kind of small houses, lots of family around, lots of cohesion, and there’s a lot of structure and family ties around there.

Interestingly enough, are you guys familiar with these like blue zone studies?

Tobias: No.

Bill: I am not. It doesn’t sound like those people are on Twitter very often, by the way.

Jake: Yeah. [laughs] That’s blue checkmark. Oh, yeah. So, exactly right, Bill. The blue zones are, they supposedly found these correlations with longevity and what they were trying to pin to a vegetarian diet. But if you dig a little bit deeper into it, there’s lots of places that have vegetarian diet, but have horrible mortality rates relatively speaking, and what’s probably more likely is that all those blue zone places have very strong social structures and family ties that create lower stress.

Stress Kills You

Jake: So, what’s actually happening there biochemically with lower stress. And why is that? Maybe like some mechanism to cardiovascular disease.

Cortisol, right, is the stress hormone. When it’s released, it releases– So, it’s basically, priming your body to fight or flight, right? The time is like, “I’m going to need to do something right now.” So, it’ll release energy within your system. So, it’s called catabolism. It’ll speed up your heart rate, it’ll dilate your pupils, your liver will start producing more clotting factor actually, in case you get hurt, you want to stop the bleeding.

Tobias: So, you don’t bleed out?

Jake: Yeah, you don’t bleed out. Like it actually will ramp up clotting factor. Raises your blood sugar, so that there’s more energy available. Basically, will deprioritize repair and your immune system because it knows it needs to handle something right now not be worried about the future. So, it actually starts like basically hyperbolically discounting the present compared to the future. Now, normally, cortisol will be dumped by exercise. So, typically, when you’re going to get into a fight or flight, it would be cleared out by you actually moving and doing something. [crosstalk]

Tobias: If you actually got in the fight, you’ve actually cleared it all out. So, fighting is good for you. And that’s all we have time for, folks. See you next week [crosstalk]

Bill: Yeah, I got that.

Jake: [crosstalk]

Bill: That’s what I got.

Jake: That’s right.

Bill: I think we just got demonetized.

Jake: As soon as I said cholesterol, we were demonetized. This is like tinfoil hat stuff.

Tobias: Big Statin’s got us.

Jake: Statin got us.

Bill: The statin industry definitely, probably, actually lobbies Google. I don’t know how that works but I’m going to go with it.

Tobias: I don’t want to derail you, dude. I’m interested to know how do we– Keep going.

Jake: If you are just sitting and you’re stressed out about money, you’re stressed out about the stock market, you’re stressed out about family problems, putting food on the table, whatever it is that you’re stressed about, and you don’t actually get the exercise to clear that stress out, clear the cortisol out, you end up with basically, your body prioritizing right now as opposed to being healthy later. So, it won’t fix a lot of the inner damage that’s happening because of this.

I think if we like actually wanted to get convoluted with this like, I think, we may be doing a really nice service, the show in like providing a little bit of levity, and a little bit of community, and suffering through things together in a way that hopefully, maybe, we’re reducing the cortisol resolve for everybody who happens to tune in. This is like a fairly tight knit little community that maybe like we lean on each other in such a way that, I’d like to think that we’re all helping each other to clear some of that cortisol and maybe live a little bit longer and better lives. So, that’s a kind of a Thanksgiving thing I wanted to like, we thank you to everybody as part of the community to that–

Bill: Oh, I thought that you were trying to tell them to thank us, which I liked.

Jake: Well, that can happen too.

Bill: You are welcome for us gifting you with our presence.

Jake: [laughs]

Tobias: The comments on the side is always amazing. It’s amazing how it’s grown over time, too. We should try and capture that offline. I’ve been thinking about a way to do it. I’ve got this idea somebody, one of our guests, actually, recommended this little service. I’m going to implement it. So, it exists when the show’s not going on. It’s a little preface. I don’t have any announcements. We’re just working on something behind the scenes.

Bill: Let me know how that works.

Jake: Yeah.

Tobias: I will. It’ll be out soon.

Bill: Thank you.

Jake: Well, anyway, if you’re feeling stressed, make sure you get your exercise in so that you dump that cortisol and don’t create long-term problems.

Bill: I can feel my heart speeding up right now as you’re talking. Is that a good thing or is that bad?

Tobias: Why is it speeding up?

Bill: I don’t know man. I got a lot of shit going on in my life like real talk. A lot of stuff outside the market. That is like very stressful. I’m waking up at night thinking about it.

Tobias: Yeah, that’s–

Bill: And I think that, Jake’s talking about triggered my thinking about it.

Tobias: You’re stressed about the stress now. There’s [crosstalk] stressed about.

Bill: Yeah, no, that’s actually, no real talk. That’s actually where I am.

Tobias: Are you getting exercise? Are you on the Peloton?

Tobias: Yeah, I am. I’m eating better and I’m drinking a lot less. I’m taking care of myself in a much better way but it’s just outside of my control, and say, it has not been fun.

Tobias: Sorry to hear that, mate.

Bill: It’s all good.

Tobias: Get yourself a kettlebell.

Bill: What?

Tobias: Get yourself a kettlebell.

Bill: I got two. I got to go throw them around. Yesterday, I was reading in a hammock. So, I can’t be that upset. But it does like, “Come up.” It’s like family shit, so. Anyway, no, I like it, man. I think, one thing that I appreciate about you guys, and I think that the three of us have like real priorities in order, and I do think that someday, if we ever hang out at Berkshire again, if people come hang out with us, I think you’ll find us to be three pretty jovial fellows when we’re together. I think, we take the big stuff seriously, and the other stuff we keep in perspective. I think, that’s probably one of the reasons we all connect.

Tobias: I agree. But I would say also that, I have–

Bill: Growth must die.


Bill: I’m just kidding.

Tobias: I hope I can [crosstalk] some of those things when they get cracked. I’m not a hater.

Bill: I kid, I kid.

Change Your Brain: Andrew Huberman

Tobias: I’m just sad because I’m underperforming relatively. I think that you have to consciously focus on stress reduction and I do lots of things. Some of them are mindset things like trying to follow what the stoics prescribe, some of what the Taos prescribe, I think that stuff is all excellent, also getting exercise, also not checking the portfolio through the trading day. Those are all very, very helpful things for reducing the stress. Andrew Huberman, who’s a PhD professor at Stanford, I think, he has some good prescriptions on. He says, “You got to keep the software in your– or the hardware in your head that the dopamine gets attracted to. You have to keep that squeaky clean by denying yourself constantly through the day.” He recommends 25 denials. So, anytime, you go to think about doing something, you got to delay it for 10 or 15 minutes.

Bill: Oh, it’s brutal.

Jake: Life is good for 20 of those. Hey, oh.


Bill: Oh, that’s good. That means you got good tea. If she’s saying no that often.

Tobias: You know what? You remember how we talked about mouth taping, by the way like while you sleep?

Bill: Yeah, that’s what I should do on the podcast?

Tobias: [laughs]

The Benefits Of Nasal Breathing

Jake: Well, no. Yeah, I couldn’t figure out like why would that even make any difference but apparently it has something to do with nitrous oxide, which is produced more in the nasal cavity when you breathe through your nose, and your nitrous oxide will open up, actually opens up the exchange between like gases more in your vascular systems. Therefore, you’ll get more oxygenated blood, like everything will work better, basically. So, that’s [crosstalk] mechanism.

Bill: So, what do I tape it with? Like medical tape?

Jake: Yeah, medical tape, athletic tape, either any of those.

Tobias: Duct tape? That’s not right.

Bill: No, fuck that, there goes my lips.

Jake: That’s if you want to get a little bit more rough. [laughs]

Bill: [laughs] That’s for after-after hours.

Tobias: I started doing the nasal breathing during exercise because I used to swim. So, you got to hold your breath when you’re swimming like that. And there’s definitely I feel– You control your breathing much better if you’re doing it while you exercise, you can control it. When you’re not exercising, I noticed that the breathing is much easier. So, I started doing it. It’s the most claustrophobic I’ve ever felt in my life like throwing kettlebells around nasal breathing. I thought, I was going to die the first time I really did it.

Bill: Really?

Tobias: Yeah, but it took two weeks later, three weeks later now. It’s completely, like now, it’s as easy as breathing through my mouth, and it’s preferable, because your mouth dries out if you do it.

Bill: What kettlebell regimen are you on?

Tobias: I’m– cleans and snatches like the full off the ground into the air.

Bill: I like it. Full body.

Jake: You tried the Turkish get up.

Tobias: Yeah, I mean, I do that on my off days. That’s fun.

Bill: I do it on my off days. What a big-time comment.

Tobias: [laughs] Because it’s doesn’t like really get the heart rate going. It’s more like a balance and mobility thing.

Bill: Yeah. You ever check out Becoming a Supple Leopard, the book?

Tobias: I have it. Yeah, I haven’t read it, though.

Bill: Yeah, that’s real shit.

Tobias: Is it good?

Bill: I flipped through it. Whenever I have pain, it removes my pain. I stopped looking at it. I’m sure it’s fantastic if you live by it.

Tobias: We’ll do a kettlebell dedicated episode next time. But that’s time, amigos.

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