In this episode of the VALUE: After Hours Podcast, Jake Taylor, Bill Brewster, and Tobias Carlisle chat about:
- Buffett’s Simple Valuation Metric On Coke $KO
- Why Didn’t We All Just Buy $GOOG
- Terry Smith – First Order Of Commodity Price Spike Not On Consumer Prices, But On Company Profits
- Cytokine Storms
- Small Cap Value vs Value Generally
- Growth’s Been Beaten Up
- Zuckerberg’s Metaverse
- David Collum’s Year In Review – Commodities
- Zeckhauser’s Maxims for Thinking Analytically
- Is There Enough Lithium to Maintain the Growth EV?
- Cathie Wood’s Portfolio – Some Crazy Valuations
- Bill Miller Puts 50% Of His Net Worth In Bitcoin
- Bill Nygren – The Problem With GAAP Accounting
- Vale Lou Simpson
- What Is Web 3.0?
- Buffett The Bull, Dalio The Bear
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: -the button. This meeting is being livestreamed. It is 10:30 AM on the West Coast, 1:30 PM on the East Coast. No idea what that is Australian Eastern Standard Time. I think this is the time of [unintelligible [00:00:17] it could be 5:30 AM?
Jake: Hello.
Tobias: What’s happening, fellas?
Bill: How’s it going?
Jake: Bill’s fresh off. He’s got nap head.
Tobias: Nap jitsu.
Bill: Yes, this is true. I want to go take another. I may. If I’m not saying anything intelligent, it’s because I’m sleeping in my head.
Jake: [laughs]
Tobias: That’s what it is.
Jake: Yeah, that’s the problem.
Bill: That’s right.
Jake: [laughs] So, what topics we got today?
Vale Lou Simpson
Tobias: Well, some sad news. Louis Simpson, the great, Louis Simpson passed away yesterday. Vale Louis Simpson.
Bill: I was almost certain you’re going to say Bob Saget died.
Tobias: [laughs] Yeah, Bill, Bob Saget also died.
Jake: Is that right? I didn’t hear that.
Bill: Yeah, man. Danny Tanner, no longer.
Jake: Oh, how old– He wasn’t that old.
Tobias: 65.
Bill: Yeah.
Tobias: Congestive heart failure.
Jake: Ah, dude.
Bill: Cocaine’s a hell of a drug.
Tobias: [crosstalk] Evidently.
Jake: [laughs] Oh.
Bill: I don’t actually know that, that’s true.
Jake: Yeah, that’s probably like slandering the dead or something.
Bill: Yes. But he’s got a good joke.
Jake: What was always wild to me was his persona from Full House versus his stand up, which was super raunchy.
Tobias: Yeah.
Bill: Yeah.
Jake: Oh.
Bill: Yeah, he had quite a stand-up persona.
Jake: Yeah. Oh, man. That’s a bummer. You guys just ruined my day.
Bill: I know man. It was sad.
Jake: Who’s the third one? They always come in threes, don’t they?
Tobias: Yeah. Remains to be seen.
Jake: Okay.
Tobias: I got a few interesting topics today.
Bill: Ooh, nice. You can carry me.
Jake: [laughs]
Tobias: So, I started reading Dave Collum’s Year in Review. It’s such a massive time. It’s like a week-long effort to get through it. It must take him a year. He must have to start this [crosstalk] year’s right now.
Jake: Yes, start it– [laughs]
Tobias: But there’s some interesting stuff. He’s talking a little bit about commodities. I’m not talking about him on commodities. I’ve got Fundsmith on commodities, which is interesting. Little Substack I found, Watchlist has this take on Buffett’s analysis of Coke, which I thought was kind of interesting and Drew Dixon and Albert–
Jake: Bridge.
Bill: Albert Bridge.
Tobias: Albert Bridge. Thank you. Capital, he’s done a little bit on value versus growth in a drawdown. So, those are my three topics. JT, what do you got?
Jake: Man, you are overdelivering [crosstalk]
Bill: Yeah. I’m going to let you run with that, Toby.
Tobias: Yeah, toss those out. We can chew on them.
Jake: I actually have two. So, I guess, we were all anticipating having to bring a little extra this week. [laughs] My first one is on cytokine storms, which has an immune reaction that maybe we’ll get into. And then, being towards the beginning of the year and a bit of a, you know, do a little review and soul searching, I did a kind of a postmortem on “Why the hell didn’t I own Google over the last five years?” So, there’re some numbers and little back of the envelope math to unpack that might be useful or interesting.
Bill: I’m going to see what you guys have to say.
Jake: Okay.
Tobias: Jake, do you want to– [crosstalk]
Bill: I’ve been thinking about Bridgewater stuff. So, if we don’t get through, I may talk Bridgewater a little. I also do think somebody– [crosstalk]
Jake: We got a full slate today.
Bill: I do think somebody was right where– Well, I’m almost certain where Ray said civil unrest and not Civil War, but I don’t know.
Tobias: I just randomly saw a thread in it today and I thought that he did in fact say Civil War, well, according to his Twitter.
Bill: I thought he did but I don’t know. I didn’t go back and re-listen to those. I got a different video, which I like quite a bit from their CIO did a podcast with Grant Williams in End Game and I thought that was pretty good talk.
Buffett The Bull, Dalio The Bear
Tobias: A counter like random walk. It was just comparing Buffett’s sunny optimism with Dalio’s more dare assessment of the prospects of the US versus China. Dalio is a big China fan. Buffett’s obviously a big optimist in general and optimist on the US. I prefer Buffett’s view of the world, but in this thread, Dalio was like, “Chance of civil war reasonably high, higher than you might expect.”
Bill: Yeah, I guess, I just don’t know. I need more definitions on war and whatnot but yeah.
Jake: Yeah. What counts as [crosstalk]?
Tobias: [crosstalk]?
Bill: No, is it like a political war? I don’t know. Obviously– [crosstalk]
Jake: Storming the capital, does that count? The people marching, does that count? I don’t know.
Bill: Yeah. There’s sometimes when people say things that are outlandish and I don’t even know that he said that. I just think it should be the interviewer and I’ve been an interviewer and I missed follow ups. But something like that, Warren’s a follow up.
Jake: Yeah. How do you be–[crosstalk] [laughs]
Bill: Like, what exactly are you saying here?
Tobias: Yeah.
Jake: Let’s just move on to your all-weather portfolio. [laughs]
Bill: Yeah, that’s right. I don’t know that I would characterize him though as like a China lover. Although, that one answer, people are going to skewer me and be like, “Didn’t you see what he said about that?” But I just wonder– I do buy into the idea that like, the US got to set the rules for a while, and now the rules are changing. I’m not sure that we’re actually hungry enough, though, to navigate that change.
Jake: The American eater’s always hungry, Bill. [laughs]
Bill: That’s true but the American worker is very hard to find.
Jake: Oh, he is. Ouch.
Tobias: Do you think that that’s as a result of the stimulus? That seems to be the prevailing narrative, right?
Bill: No. I think for a long time– I don’t know. I think America as a country spends more than we earn and not as hungry is people that need it more. I don’t think that’s controversial. Go try to find a barback.
Jake: [laughs]
Tobias: Maybe they need to pay more.
Bill: But you can’t. So, typically, not done by Americans. I mean a lot of jobs. I don’t know. We’ll see.
Jake: Yeah, let’s.
Tobias: I’ve been a barback. That’s all right.
Bill: I have, too. I had a great time.
Tobias: Yeah. So, did I. It was fun. It was cute.
Bill: A lot of nonmonetary benefits.
[laughter]Tobias: JT, do you want to take it away. We’ll let you kick it off today since someone was really getting you to third place.
Jake: Jamming in a– [crosstalk]
Tobias: This will let everybody close down that way. You can send it off as soon as JT is done.
Jake: Well, maybe I’ll save my Part 2 for the very end but– [crosstalk]
Tobias: But you want to save this– Well, go nuts.
Cytokine Storms
Jake: Yeah. Let’s do cytokine storms first. Last time we talked about E. O. Wilson and this idea of group selection over just purely gene selection. It got me thinking about humanity as this like super organism, which is something that Wilson espoused after looking at ants and seeing how they operate as this super organism that seems coordinated at levels that don’t make sense if you just look at their very, very simple biology. So, the Spanish flu, 1918 to 1920 and it killed 40 million people. A lot of those people were 20- to 40-year-old healthy people, which is shocking and scary if you were actually living through it, and a reasonably healthy person. As far as the probably the life years lost and the quality-of-life years that were lost in that, it’s way different than COVID, where COVID had a lot of more towards the older people that fell into it.
But anyway, at that time, the global population was about 1.8 billion people. So, 40 million of 1.8 billion, that’s like 2.2% of the population. So, if we had a similar equivalent of COVID today on a 7 billion population, that’d be 150 million people who would have died from COVID versus the roughly 5 million, I think, was the last statistic that I saw. So, five versus 150, like, dramatically different, right? So, we got probably very lucky actually with the severity of COVID relative to what happened in the Spanish flu. What was going on there was this, why young people were hurt and killed by the Spanish flu was that, it created this thing called a cytokine storm.
Cytokines are this immune response that are normally okay for your body to do. They circulate through your blood, but they cause inflammation, and they help activate the immune system. But if they get to be too many of them in your blood, it will then impact your organs and actually organs will shut down and people will die from that. So, going back then to Wilson and this idea of a super organism of humanity, it has me wondering if, is it possible that COVID triggered a cytokine storm at a societal level. Like, the super organism has this immune response to a pathogen. It’s not biological as much as it actually is like a societal response.
So, we’re seeing all kinds of inflammation, we’re seeing organ failure like the trust in our institutions seems to be eroding, and a lot of my thoughts are, like, a dovetail in with this podcast I listen to with Dr. Peter Attia that he did recently on a COVID update with these other two doctors that was really good. I enjoyed it a lot. He was lamenting that he felt like, COVID has been bad, but from a societal standpoint, the loss of trust might be the biggest casualty of the whole thing. When we actually do need to coordinate again in the future for something that’s worse, like, if we actually had the Spanish flu, people might be like, “You know, what? You kind of dick me around this last time. I’m not going to listen to you this time.”
So, it had me thinking like, “All right, well, what can we do, what’s the societal equivalent of trying to clear out the cytokines?” So, in treatment for a biological cytokine storm, they will give steroids to help reduce inflammation, and they do actually dialysis to clear out the cytokines out of the bloodstream. So, what’s the dialysis that we could all be doing from a societal level to remove some of this inflammation and get back to a normal amount of trust, and interaction, and belief in our systems? For me, it comes back to controlling your own things where, go for a walk-in nature, lower your stress levels, try to be kind to each other and maybe practice the golden rule of treating people how you’d want to be treated. Humility, probably on the part of our leadership would probably go a long way right now, I think. That was actually one of the most troubling things about that Attia podcast was.
Some of the things they told about the NIH and the CDC were just like, I mean, level 10 oof, [laughs] just really like, “Oh, my God, that’s pretty bad.” So, I probably shouldn’t get into the specifics. I don’t understand them as well as probably a lot of other people do. But just the lack of transparency of what’s supposed to be science based and open book when you’re trying to be scientific, that’s a big part of the scientific method is, share the data, let other people look at it, they have kept a lot of that stuff to themselves and ignored a lot of the other outside scientists they would normally advise, they shut them out and have just stayed on their own party line or company line. Anyway, I think it’s interesting to imagine the human species as a bigger, super organism and maybe we’re experiencing an immune response to a potential threat.
Tobias: When it all first started happening, to be fair, I just spent a weekend with Chris Cole. Cole’s a tail hedging guy. So, I think he’s one of the Sentinels who’s way out on the edge watching few things happening and then I came back from that and I was seeing in the airport away from my family reading Zero Hedge on COVID.
Jake: So, everything. [laughs]
Tobias: Yeah. It wasn’t even at that stage yet. He was just saying here are all of these satellite shots of China where they had the huge– [crosstalk]
Jake: Oh, shut everything down.
Tobias: Well, they’re burning things. They were saying like they’re burning all these bodies and they had all the pictures of people falling over in the street, you remember that?
Jake: Yeah, I remember it.
Tobias: Like welding people into their house and stuff like that, which seemed pretty frightening. I have read books on Spanish flu, which followed World War I, it was like came out of World War I. So, I was pretty nervous about that. You can go back and listen to those podcasts that we were recording around that time, I thought as you’re describing like the Spanish flu was massively impactful to the working age people and society potentially could have collapsed at that point. That’s societies collapse all the time.
You go back through ancient history like, there’s some scary stuff that happens when Carthage against the Romans. The Romans defeated Carthage and then obliterated Carthage like there’s no Phoenicians left anymore. There are lots of these things have just disappeared. So, I was somewhat nervous that that was going to happen. Clearly, none of that’s happened. That was as it’s gone on it seems, not quite as aggressive as it may have first appeared.
Jake: That was a bit of luck for humanity as well. It could have been that bad.
Tobias: We didn’t know it. You should prepare for it as if it’s going to be. Not that I think that there’s much you can do to avoid it but prepare for as if it is going to be that way, get some food, and that sort of stuff.
Jake: Yeah.
Bill: I have nothing to add.
—
Tobias: Yes. Someone commented the other day that we’ve criticized Spanish moss, Spanish flu. Lo siento, amigos. I’m not criticizing Spanish. Someone has left a comment that Spanish flu is [unintelligible [00:16:06]. It came out of the US.
Bill: That’s also a lie. Nothing bad comes out of the US except for Alabama football.
Jake: Ooh, yeah. I think wasn’t it came out of Missouri or something and then take it over from the old Walmart.
Bill: It was from the Spaniards. Everybody knows it.
Tobias: [laughs]
Bill: It’s a conspiracy that you’re talking about, man. Anyway.
Tobias: What’s a Spanish moss? Can we talk about Spanish moss?
Bill: It’s very [crosstalk] invasive in Florida. [crosstalk]
Tobias: Ah, okay. Okay.
Bill: You don’t want that stuff on your trees. [crosstalk]
Tobias: We’re beating– [crosstalk]
Bill: I got love for Spain.
Tobias: Yeah. Me, too.
Bill: I went to the Basque region had some pinchos. That’s not how they say it but it’s fucking good food. Really good food. There’re these bars and you walk around and you can get a bite of foie gras. It’s like the best foie gras ever. That duck was tortured for me.
Jake: [laughs]
Tobias: Yeah. Pearl foie gras. That’s what– [crosstalk]
Bill: I mean, what else– [crosstalk]
Jake: I thought it was goose. Wasn’t it? I thought it was goose liver. Isn’t that foie gras?
Tobias: Goose. Probably, yeah.
Bill: Whatever it was I’m glad that it had a terrible life because I enjoyed it.
Tobias: Yeah. I do that to myself over in the silly season between Christmas and New Year’s, I turn my liver into foie gras.
Jake: Like a stuffed goose.
Tobias: [laughs]
Bill: I guess I kind of– I don’t know on the COVID stuff. I’m just glad I’m in Florida, man.
Jake: What do you mean by that?
Bill: I meant that if you didn’t tell me COVID was going on right now, I would have no idea.
Jake: Really?
Bill: Yeah.
Jake: Nobody’s wearing masks or anything?
Bill: Very few people.
Jake: Interesting.
Bill: Well, outside all day.
Jake: That’s fair.
Bill: I’m worried about my kids’ school, but they survived Delta and they’ll survive this and I don’t know, man. It’s time to get back to it in my opinion. But I’m also not at risk of death at the moment and I was scared during Delta. So, we’ll see. Can I think live and let live [crosstalk] is a pretty good philosophy at this point given all the data.
Tobias: There’s definitely a panic going on here in California. I’ve noticed a lot more of the n95 mask with people rolling around just with the temporary ones.
Bill: California is nuts, man. Y’all are out of your fucking minds.
Tobias: Well, not all of us, but most of us are.
Bill: Yeah.
Jake: [laughs] Collectively.
Tobias: JT, do you want to do Google or do you want me to–?
Jake: Yeah.
Buffett’s Simple Valuation Metric On Coke $KO
Tobias: There’s really nothing to this little Coke analysis. I just thought it was interesting. It’ll take me two seconds and then do Google. But watchlist investing is a Substack. They just reminded me of the great analysis that Buffett did on Coke was basically this. As long as the unit sales of Coke are going up and the share count of Coke is going down, Buffett’s analysis was this will probably work out given that it was like– It looked like he was paying more than he had ever paid in the past. But they hadn’t done any of the international expansion that we now know it has been so successful. So, it’s one of those really elegant, typical Buffett boil it down to like two moving parts, make sure they’re going in the right direction and just let it happen, which to [crosstalk] that would be okay.
Bill: Swedish match, Charter.
Tobias: Swedish match?
Bill: Yeah. So, more nicotine pouches retire shares.
Tobias: And it works.
Bill: It’s working.
Jake: It reminds me of the Zeckhauser. There’s a book that somebody wrote of all of his analytical Maxim’s and Zeckhauser was this professor at Harvard, who was an economist, but he was also a world class bridge player. Buffett and Munger were friends with him. One of the things that is in that book is that, like good analysis typically requires a denominator. So, you’re always trying to figure out per unit, those per something and that you could see it in Buffett’s when he talks about things and he says every, whatever eight ounce serving of Coke is 1/8th of it goes to Berkshire basically. He does these little interesting per unit calculations all the time and it’s really smart, but I think that’s where he got it from with Zeckhauser.
—
Tobias: Yeah, it’s a good approach. Do you want to do Google? I just wanted to mention because I thought it was just an elegant little solve and I just wanted to start using it myself. So, I thought it was good– [crosstalk]
Bill: The other thing that’s nice about Charter even though, it’s a cable company and people hate them is then they use at least my perception of their strategy, although, Comcast pricing is not that much different. But they use their scale advantage locally to drive prices down, which makes overbuilding less enticing. So, nice sleep at night stock. So, rates go up and they can’t reify their debt on the poor house.
Jake: [laughs] It’s a zero.
Bill: And it’s [crosstalk]
Tobias: There’s a question here. Is Zeckhauser the unknown and unknowable guy?
Jake: Wasn’t that-
Bill: Oh, sorry, folks. [crosstalk] with the phone [crosstalk] geez.
Jake: Dick Cheney.
Tobias: Donald Rumsfeld, right?
Jake: Oh, Rumsfeld. That’s right, I’m sorry.
Tobias: One of your veggies was on the different quadrants, right?
Jake: Oh, yeah. No, no, I don’t think that was him. I know which one you’re saying, but I don’t remember.
—
Why Didn’t We All Just Buy $GOOG
Tobias: Let’s do the Google. Why did we all despite Google and go to the beach? I think I’ve heard people buy it now. I haven’t closer look but if you don’t like it.
Jake: We’ll get to that, too. All right. When I look at Google and I say like, “Okay, why haven’t I owned it for the last five or six years?” I’ve been to the campus multiple times, I know lots of smart people that work there. I’m very impressed by the culture more generally, read a couple books about it, recognize that search and the ad cells from search is easily one of the best businesses to ever spawn on planet Earth. It’s incredible. Knowing all of that, how did I miss it and really trying to rub my nose in this mistake? Because this is one of those big opportunity cost loss that really hurt. So, it’s good to unpack it.
In this process, I tried to put myself and transplant myself back to 2015 and then just look at all of the numbers, the financials from say, 2010 to 2015 and just get a sense of what would I have paid in 2015 and if I looked forward another five or six years of what I thought the business might do, what would have been a reasonable expected return and then what actually happened? So, I’m going to walk through the numbers and I might move quick, but I should probably put this together into a tweet storm or something so that the numbers are a little bit more easy to follow along.
So, in Google’s income statement from 2010 to 2015, revenue grew from $24 billion to $66 billion. We have a 22% annual growth on revenue top line for those five years. Operating margin in 2010 was 35%. That went down to 25% in 2015. I don’t know if this is like moonshots or whatever the hell was pinching the operating margin, but margin was trending down. And then you had the 2015 valuation. The EV/EBIT was 19 times. The average EV/EBIT over that 2010 to 2015 period was 17 times. So, it was roughly trading where it typically traded in 2015 if I was to consider buying it. So, you had a market cap of about $360 billion, and EV the cash balance was had started out at $24 billion in 2010 and then gone to $63 billion. So, the cash balance actually was on a 20% CAGR as well. So, backing the cash out, you had an EV of $307 billion in 2015.
So, let’s start from there and then I imagine like, okay, I’m going to make projections to the year 2021 like, what would I have expected this business to do? So, I assumed 15% CAGR, which it was 22% I said previously, but a company that big, if you look at the base rate book that now boasts and put out you would say, “Boy, there has to be something really special going on here to ever imagine that you could keep compounding at that level.” So, I’m just going to back it up. I’m not going to say it’s dying, but I’m going to back it off somewhat. So, 15% CAGR. That would make them revenue growing from $66 billion in 2015 to $152 billion in 2021. All right, I’m going to assume operating margin falls to 20%, which remember, it had gone 35%, 25%, I’m going to assume it found a reasonable level of 20%. So, that would then make earnings grow from $17 billion to $30 billion from 2015 to 2021.
And then I’m going to stick a 20 EV/EBIT multiple on that. Like I said, it was 17 for that average of 2010 to 2015. So, I’m already imagining a pretty good exit multiple at that 2021, I think. So, you end up with an EV of about $600 billion. So, grow that cash balance again by 15% CAGR to then back into a market cap of $455 billion then is what I would have come up with as my projection of the market cap in 2021. So, $360 in 2015 that was known, my projection’s $455 in six years, that’s a 4% CAGR. Okay, that’s not that amazing. I thought I gave them reasonable credit, I gave them a 15% top line growth, I gave them 20 times multiple, 20% margin. These are all pretty healthy assumptions I think like I’m not going crazy. Well, what actually ended up happening?
Revenue grew to $182 billion, which was an 18% CAGR. So, the revenue growth rates slowed down a little bit. I gave them 15%, they came in at 18%. All right, not that far off. Operating margin came in at 23%, I gave them 20%. All right, we’re not that far off there. So, then an EBIT of 42. Here’s where the thing went sideways for me. Multiple went to 31 times EV/EBIT. I was giving them credit for 20. So, I was off by quite a bit. So, that comes in that and at $1.3 trillion for the EV then at that point, back out $137 billion of cash, and you end up with a market cap then of basically like $1.1 trillion in 2021. So, share count basically stayed flat, like they retired, whatever they issued and in stock options to all my friends that work there.
So, you ended up then, the market cap going from $360 and 2015 to $1.1 trillion in those six years, which is a 22% CAGR that I missed. So, my projections, what I thought were reasonable came out with a 4% potential CAGR and it ended up coming in at 22%, and basically, I was a little too pessimistic on top line and I was a little pessimistic on margin, but I was way too pessimistic on what everyone else was willing to pay for it at 20 versus 31.
Tobias: So, is the analysis that you didn’t make a mistake because on the assumption that you made at the time it was the right decision?
Jake: I would say that my–
Tobias: Or sort of false humility aside.
Jake: Yeah. No, my down the middle like base of what I imagined the business would do was probably a little pessimistic even looking at it today. So, it was a little bit more right-taily of an outcome. What you maybe should have expected was such a great business and so many smart people working there and so many ways to win. Now, here is where it gets insane. In the last nine months, so trailing 12 months from the last report which is 930, 2021, revenue has grown to $239 billion, which is a 44% CAGR over the last nine months. Operating margins jumped to 30% from 23%.
Tobias: Whoa.
Jake: Yeah. So, EBIT $72 billion which is 105% CAGR over a year.
Tobias: Whoa.
Jake: So, the multiple actually came down a little bit from 31 to 25 EV/EBIT, but you still end up with a 77% CAGR in the EV over the last nine months. So, this thing just went absolutely phew, I mean, it’s insane.
Tobias: Why did it take off? Is it a lockdown thing or is it, what is it?
Jake: Yeah, I think it’s lockdown, everyone on the internet all day long now, I don’t know. Bill, you probably have a better idea why.
Tobias: YouTube?
Jake: Yeah. Maybe. [crosstalk]
Bill: I think they reined in some spending buybacks started to become a priority, get some more e-commerce, more advertising traveled, advertising starts to come back. I don’t know exactly all the reasons for the inflection up. But I do think like, so, if you just hang a 75% tax rate on a 20% EBIT or 20 times EBIT multiple, like 26 times, I don’t know. I think the ROIC probably requires slightly higher multiples for this business.
Jake: Especially 30 buybacks [crosstalk] instead of moonshots that don’t ever materialize.
Bill: Ah, what?
Jake: Yeah. It’s okay.
Bill: Yeah, yeah, yeah. Well and then they got GCP starts to show some flash and I don’t know. You start to get some religion on what actually matters from spend, and you get a CEO change, that guy gets focused on some things. I bought it when the CEO turned, I increased my position when the CEO was named and actually, I thought it was less of two people’s pet project and closer to a business that was going to be running for public shareholders.
Jake: Good man.
Tobias: A comment here from Dylan Thompson saying, ” Google going to rein in the headcount and expenses like Bezos did to Amazon back in 2018.” I tend to agree with that, I did a deal with them when I was General Counsel of the Telecommunications company in Australia, and we were just astonished at the amount of money that they spent. They are fully first class.
Jake: Oh, yeah.
Bill: As a shareholder, I don’t know that I really want that to be honest.
Tobias: But they have that lever to pull at some point is, it doesn’t have to be now. But if they ever look like they’re going to miss number, say, everybody, you got to fly business class now.
Bill: Yeah. I mean, YouTube is a fucking monster, man. My kids don’t even watch TV anymore. I don’t know. Thinking really long and stuff like IP that’s tied to the bundle. I guess, Viacom bought Ryan, or the rights to Ryan or whatever.
Tobias: Oh, the kid who does the unboxing?
Bill: Yeah, well, he had Ryan’s play house or whatever. But my kids watch stuff like The Fun Squad and just these families that pimp their families out. My kids love that stuff.
Jake: Yeah.
Bill: Bizarre.
Jake: My kids like to watch other people play video games and then yell over the top of them while they’re playing the video games. It is so annoying to listen to that. [laughs]
Bill: The other thing is, Google, they have a lot of stuff that’s working in a big way. I was doing ROKU research and ask some of my international peeps like, “How do you guys watch TV?” The amount of people that are watching on Android stuff, I think as a US focused person is easy to miss. Then, once you think global, Google’s a monster.
Jake: Do you guys want to try walking forward five years from here to see what it might look like? [crosstalk]
Tobias: Yeah. Just before you do, there’s a good comment from Wolfflow. “They took away the dislike button so there’s nothing not to like.” That’s a good one.
Jake: [laughs]
Bill: Well, I see dislike on ours right here.
Tobias: They don’t count them.
Bill: Yeah, that I don’t want– [crosstalk]
Tobias: You mash that button. It’s just you.
Jake: Smash that dislike button.
[laughter]Bill: It’s a bad idea. I’ll do it and I’ll come back with an actual not off the top my head answer.
Jake: You’ve done some analysis, JT?
Jake: Yeah, of course. We’ll try to walk through the same exercise but from today looking forward, what might it look like? So, let’s assume first of all that trailing 12 months from 931 is close enough to call that 2021 and we’ll just work forward from there. Let’s assume revenue grows at 15% CAGR for the next five years. It was 18% the previous five years, but they just had this monster 44%– [crosstalk]
Tobias: Listen, JT.
Jake: I know. Fuck. [laughs] Someday, there’s going to be some reversion to the mean, where you can’t just grow to the sky. Well, you can just put up 44% last year, you would think that maybe that was put forward a little bit.
Tobias: I’m not criticizing. How often you are going to be too pessimistic on your assessments like not very often?
Jake: All the time, apparently. So, revenue then at 15% CAGR gross from $239 today to $480 in 2026. Let’s give them operating margin at 25%. Like I said, 30% this year, but let’s just say that there is some drift downwards there like, it’s tough to run a business and be that profitable all the time but they continue to do it. So, that gives you earnings growing from $72 billion today to $120 in 2026. Let’s give them a 25x EV/EBIT. They’ve averaged 24.5 over the last five years. We’re paying up at the end of this terminal value, all right? So, that gives you an EV of $3 trillion.
Tobias: Modest.
Jake: Yeah, $3 trillion is a big business. We’re going to assume the cash balance of today grows at a 10% clip, which matches the last five years. So, that’s going from $142 billion to $234 billion. So, we’ll back that out to give us a market cap of $2.7 trillion let’s call it. So, going from today 1.8% to 2.7% in the next five years, that’s an 8.8% CAGR over the next five years if they can deliver those results and that’s what people are willing to pay for it. Well, let’s then also assume another 2% share count reduction if they’re buying back shares, which looks to be what they’re starting to do.
So, even with very optimistic assumptions, I think, maybe I’m wrong again here as always, but 15% revenue growth rate, 25% operating margin 25 times EV/EBIT, you only get about a 10% expected return from here, which I mean, 10% is okay but there’s still some level of execution risk baked into getting to that $3 trillion. I put together a little bit more of a bearish scenario let’s call it. Because maybe, I don’t know I’m wired that way but let’s just assume that they grow 5% revenue growth rate off of a huge base.
Bill: No way.
Jake: Huge base.
Bill: No way.
Jake: [laughs]
Bill: No fucking way.
Tobias: He’s doing a pessimist [crosstalk]
Bill: I don’t care. It’s not realistic in my opinion.
Jake: All right. Well, let’s just humor me for two seconds.
Bill: Okay.
Jake: All right, that gets you to about $300 billion in revenue in 2026. By the way, like–
Bill: Is this real or is this nominal?
Jake: [laughs] Does it matter?
Tobias: That’s nominal, is it?
Bill: Yeah, because I mean, if we’re going to say inflations like– [crosstalk]
Jake: It’s nominal.
Tobias: 5% is inflation .
Jake: All right, fair enough. Call it real. But let me remind you, though, that 2019 revenue was $160 billion. So, we’re 2x-ing revenue from 2019. This isn’t insane.
Bill: There was a big change from 2020 till now.
Jake: I know. Exactly.
Bill: The world did change.
Jake: That is true. All right, let’s shrink operating margins to 20%. They were 22% in 2019. So, this isn’t unprecedented. That actually changes earnings of $72 billion today to $61 billion in 2026. Because they’ve just been like so blow it out for the last year. Let’s give them a 15 times EV/EBIT, which was the average from 2010 to 2014. So, again, not unprecedented. That gives you an EV of $915 billion, okay?
Let’s assume that the cash balance stays at $142 and then, we’re doing pessimistic and we’re going to say that they piss away some of the money, they don’t do buybacks, it’s all moonshots and first-class tickets. So, that gives you then a market cap of $773 billion which that’s a negative 15% CAGR from today to 2026 if that’s what happened. So, I don’t think these are crazy pessimistic assumptions to have 5% revenue growth, 20% operating margin, 15 times EV/EBIT, and you end up with a negative 15% CAGR from here.
Bill: It’s not going to happen.
Jake: Well, I’m not saying this is a likely scenario, but I don’t think it’s a 0% chance, do you?
Bill: I think that plucking 5% out of the year is not– Yeah, I think it’s very, very low probability scenario. Yes, I do.
Jake: You could be right. I’m not saying that you’re wrong there, but you are trying to wrap your mind around the potential things that could happen– [crosstalk]
Bill: I understand. But to the upside, you got Waymo there, like, that’s not nothing. You got GCP there, that’s not nothing. You got a continued structural move to digital advertising, the world going more mobile. Man, 5% is tough for me to buy. I’m not saying it’s impossible, but I don’t think it’s probable which you don’t either. To be fair, you’re saying it’s a bear case.
Jake: Yeah, I would say that you really cannot believe it if you’re going to be long from here.
Bill: I do not.
Jake: That’s fair.
Bill Nygren – The Problem With GAAP Accounting
Tobias: Bill Nygren has been pretty good on Google for a longtime. Oakmark’s had had a holding in it. His analysis has been basically, the problem is the accounting rules, the treatment of other bits, expensing other bits when– they capitalize other bits and they do a few other things. Basically, they say, you’re getting Google’s search business for less than an S&P 500 multiple once you back everything else.
Bill: I think with a lot of these tech companies, I haven’t quite fully figured out how I like to do it. But I almost think of shifting the income statement where 2020s expenses should actually be comped to 2021 or 2022 revenues, if that makes sense. Because they’re spendings of so far ahead of when the revenues come in that if you’re looking at the margin, it’s artificially compressed relative to what reality is. The thing that is crazy to me is, even with that growth, I’m just looking at 2020, $65 million of cash flow provided by operations, despite that kind of growth, that’s fucking crazy.
Jake: It’s all time– [crosstalk]
Bill: Your typical business like, working capital ends up, taking some money, and growth is not cheap. These guys just like showering themselves in cash while they grow. It’s insane.
Jake: Agreed.
Bill: I mean the buybacks really ramped up that I think got the market excited.
Tobias: Are they net buybacks or they just mopping up all of the option issuance?
Jake: No, it crossed over like-
Bill: Yeah, 20–
Jake: -2017-ish, actually they stopped. It peaked in 2018 and it’s been starting to tip over and trend downward as total share count.
Bill: They need to lever up and bro down.
Jake: That’s the Apple playbook.
Tobias: Yeah, it got them into $3 trillion. Remember when a trillion dollars was a lot? When did the first company hit a trillion dollars? That was only a few years ago.
Jake: Yeah.
Bill: My data feed might suck, but just looking at consensus, $80 billion of free cash flow in 2022 on $1.7 billion EV, I mean, you’re like a 4% free cash flow yield a year and a half out. That’s like, it’s not that rich.
Tobias: Question from Annabelle Miller. [crosstalk]
Bill: It’s not. What do you think you fade it to?
—
What Is Web 3.0?
Tobias: Hold on, hold on. This is a credible, this is an interesting question. Annabelle Miller says, “Isn’t the Web 3.0 premise Web 2.0 ad driven business models are defunct?” What is Web 3.0?
Bill: Well, my understanding of some of the goal of Web 3.0 is to distribute some of the economics back to the people and away from those companies. I don’t give a shit what the premise of it is. We are not even close in my opinion to proving that it’s going to be a mainstream concept. I say like I’m crypto curious, I say, I’m interested in these NFTs. I’ve also said like I am curious for the same reason that I should have been curious about the internet in 1999. I think these could be 20 or 30 years away. The idea that, I don’t know. I don’t know how it’s all going to evolve. I got to think Google has some sense of how it might evolve. I also think it’s interesting, a Web 3.0. I guess there’s different nodes it’ll all run on. So, it may not need GCP.
Jake: I did see a funny tweet that said, “Web 4.0 is just going outside.”
[laughter]Bill: Yeah, I mean, look, it’s a risk. I think Preston Pysh sent me some stuff through, I forget what the wallet was, but I think I talked about that when he sent me bitcoin over a wallet and I was like, “Whoa, this is crazy.” When you think of international remittances, when you think of the banking or the rails and whatnot, I don’t know how the backend tech works. I have a hard enough time following the companies I own.
Tobias: With the possibility for Web 3.0 this like distributed approach, how do you feel that something like Facebook’s metaverse? Are they trying to AOL ‘walled garden’ just going at the wrong direction?
Zuckerberg’s Metaverse
Bill: My perception of what Zuckerberg sees is the next iteration of social. I think the error that people make dismissing the metaverse is they see the numbers and it’s a flashy like, it’s obviously a marketing ploy like, what it’s called and whatever. And then people are like, “Well, it’s not getting adopted today. Therefore, this is stupid.” I agree, Oculus has a long way to go. I’m not sitting here saying, “Oh, it’s tomorrow, we’re all going to plug in.” But to sit around and hang out like– I totally, if there was a world where my friends from Auburn and I all had some sort of AR or VR, well, this would be VR glasses, we could watch the Alabama, Georgia game together, I would totally do that stuff. I think that’s what like Zuckerberg sees, and then I think that it’s very real when you apply it to business.
Tobias: Why can’t you just put the game on at your house and open up a Zoom pointing at you?
Bill: Well, because it’s two dimensional and not three dimensional. There is an element of feeling that’s different when you watch through the Oculus, that sensory. It’s why people get motion sickness.
Jake: Nausea is that the feeling. [laughs]
Bill: Yeah. Well, some people, yeah. It’s a very cool idea. I think if you’re Zuck and you’re looking at how much cash this business is printing, I don’t know. It does seem like a logical place that the world could go. So, to just not invest in it seems like death to me, but that sounds crazy. At a minimum, I got to think he’s going to get some advertising insights from all the R&Ds doing. If that can take them into the next 20 years and this thing’s a homerun even if it’s maybe not NPV positive. It’s like milk. I [crosstalk] a loss leader.
Tobias: Zuckerberg is cookie looking by naming it being Meta trying to scare the other kids away. Yeah, it’s pretty funny.
Bill: My boyfriend, Cisco, thinks Roblox is the best metaverse play.
Jake: Your boyfriend, Cisco?
Bill: Yeah, that’s right.
Jake: Oh.
Bill: I think, he’s got a pretty compelling argument. It’s a damn good business model, at least it appears to be.
Jake: Toby, do you have more– I thought you have a couple extra items we need–?
Tobias: I got some bits and pieces. Throw your questions in, guys. Nothing’s particularly big here. I was just throwing them out. So, Terry Fund Smith talking about commodities because as I was saying Before I read Dave Collum’s– [crosstalk]
Bill: Terry Smith?
Jake: Yeah. Changed his named to Fund Smith. [laughs]
Tobias: Did I say Terry Fund Smith? [laughs]
Jake: Terry MacFund Smith.
[laughter]Bill: Tim Apple.
Jake: Tim Apple.
Tobias: Just so everyone knows what I’m talking about.
Jake: Warren Berkshire.
David Collum’s Year In Review – Commodities
Tobias: [laughs] After reading Dave Collum’s, Dave’s written a little bit about commodities have basically not participated in the last 13 years or 14 years, whatever it is. You can find all those charts that showed there’s extreme disparities between– The equities versus commodities, picky commodity, where a wider spread than we were in 1999, whether that’s meaningful or not, I have no idea. Because the natural state of commodities has tended to be, I think, it’s the deflation because we get better at pulling stuff out of the ground. Having said that, we’re doing increasingly heroic things to pull energy out of the ground. So, maybe that does get harder and harder to do.
Terry Smith – First Order Of Commodity Price Spike Not On Consumer Prices, But On Company Profits
Tobias: There’re a lot of facts and figures in his little article. So, I was just interested in this little thing from Terry Smith at Fundsmith. It is great name for a fund, by the way, or for a firm. He said that the first order of commodity prices kicking off isn’t felt by consumers. Because they tend to be a first order goods consumed by producers or consumed by manufacturers, consumed by businesses. So, they impact business profitability before they impact consumers. But the way that they might show up is like some increase in the discount rate. So, high-quality companies definitionally has very high margins and can control its margins.
If its input costs go up depending on what portion of those margins the input costs consume, that’s how much impact the profitability, may be that that increase in the cost, cuts the margins, warrants an increase in the discount rate. So, you see some of these companies that are intensive consumers of commodities being impacted. I don’t know if you then necessarily want to go and get longer haul of these commodity plays. They haven’t been particularly good, gold does look interesting, energy has been running. I don’t know. What do you guys think?
Bill: I think that you said that high-quality companies have high margins and there was one amendment. They can have high turnover and low margins. That’s another way that you could run that. Like, Costco, for instance. But I agree that they have pricing power. I talked to Will Thompson. Will runs massive capital and I interviewed him. It’s coming out, I think, in two weeks. He said something that I think is really right. I think it’s been somewhat similar when I pitch banks in the past like big banks. Although, Will’s, I actually do think was an asset specific thesis. When you get generalists that are pitching big commodity companies, it’s basically a macro bet.
Tobias: Yeah.
Bill: And that rarely goes well. I think it’s interesting that a lot of people right now that I see just in the chatter and whatever are like, commodities are cheap and everything else is expensive. But then it seems to me that at least some of these people are projecting that we’re in an everything bubble. My question is, if the everything bubble pops, it would tend to suggest to me that commodity quantity demanded would go down. If the quantity demanded of a commodity goes down the operating leverage bucks you hard, and that is like a technical term. I think that maybe– [crosstalk]
Jake: CFA Level III.
Bill: Yeah. Then they’re not so cheap. On the other hand, see what’s going on with lumber and it’s like, man, if this sticks, oh, my. So, I don’t know.
Tobias: Mike Mitchell’s been in the comments. There you go, Mike. We finally got into lumber.
Bill: Yeah. I don’t know. I understand why people like commodities right now. I don’t know, man. Cheap cyclicals, generalist pitching commodities, generalist pitching big banks, I’m not sure how the base rates work on that.
Tobias: JT?
Jake: Hard to unpack. There’s a lot of moving pieces to all this. I think it’s pretty safe to say I think that and like, Einhorn has observed this that, the capital that’s gone into those industries has really been shut off and pinched off.
Tobias: Yeah.
Jake: We’ve probably spent a lot more capital, a lot more interest going into software projects, then there has drilling for oil, or iron ore, or something. So, I don’t know. I think these things all move in cycles and eventually there’s some reversion to the mean on all of them. I don’t know how long that takes. I don’t really care what generalists are saying or doing, or I wouldn’t try to use that as a measuring stick for much. That’s basically Mr. Market adjacent. But I don’t know. Very long term, I think that long commodities is short human ingenuity and I wouldn’t really want to be short human ingenuity for a long time.
Bill: I guess, what I would say about the generalist comment that I made is, if you listen to Mike talk about lumber, I think that’s how good you have to be in commodities. It’s not a game to just in my opinion look at and be like, “Yeah.” Now, that said–
Jake: Which investment space is right where you should just have a half assed understanding? Just punting.
Is There Enough Lithium to Maintain the Growth EV?
Bill: Well, yeah, there’s none. I guess, my personal problem with a commodity thesis is the amount of time that I’m going to sink into learning about it. I don’t view it as particularly transferable in the future. As someone that is just trying to figure out how to leverage time better because I have none of it right now. It’s just not really where I’m going to spend my time. If I have an aversion, that’s probably the actual answer as to why. I do think that like, if these EVs that will cite some stats on how much it’s going to take, how many years of lithium production we need in order to actually go to EV. It’s insanity. We just fundamentally don’t have it.
The other thing that I think is somewhat funny is everybody that’s talking about climate change and hailing EVs as the solution like dig a bunch of holes in the ground, fill them with acidic runoff, take all these natural resources out of the ground, and put them in batteries. We’re going to have a different climate problem. It may be like a resource allocation issue or whatever. But I think there’s maybe some unforeseen second order effects from all this rah-rah that a people may wake up and say, “Oh, well, the devil we knew was better than the one we ran to.” But [crosstalk] we will tell on that.
Jake: You always have to ask and then what?
Bill: Yeah.
Jake: What we need is an asteroid that we can harness. [laughs] That’s all these rare earth minerals in it and land that thing.
Tobias: Maybe it’ll land all by itself.
Jake: Yeah.
Bill Miller Puts 50% Of His Net Worth In Bitcoin
Tobias: Maybe something will fling out of a Kuiper belt and get us. Maybe it’ll come in at too higher speed. Yeah, somebody mentioned before Bill Miller, who’s in the process of stepping down, and like last year, the year before, I think he said he’d become a billionaire. This year or recently he said that 50% of his net worth is bitcoin.
Bill: Yeah, dude, he’s been pitching bitcoin since 2015. He’s got that Preston Pysh money.
Jake: And the other 70% is Amazon.
Tobias: Yeah. Is that how math works? Yeah. I think that’s right.
Jake: Well, if you’re levered up.
—
Small Cap Value vs Value Generally
Tobias: I saw a question before about small cap value versus value generally. It’s tough because I spend a lot of time in mid, and large, and small. The smalls are, I don’t know if this is always the case but the smalls are definitely not as high quality as mid and large are. The smalls traded at a big discount to mid and large. So, the question is, is the discount to the smalls or is the multiple low enough to justify the discount the lower quality that you’re getting from small? I don’t know. I honestly, don’t know. My feeling and I know that this is completely counterintuitive. I feel like mid and large value is a slightly better place to be than small value, even though, it is a little bit more expensive. That might be complete heresy. It might be 100% driven by multiples.
Jake: Well, so, the small value is the only style box right now that’s below its 20-year average PE. All the other ones are above their 20-year average.
Tobias: Yeah. I think I talked about that a few months ago that the bottom, if you can visualize that Starbucks with the nine things on one axis is the size and on the other axis is value to growth, the bottom left-hand corner, which is small value is the only one it’s like. What did you say 95% of its long run mean?
Jake: Yeah. It’s not like it’s insanely cheap relative to its long run, but it’s the only one below.
Tobias: Yeah. If you go up that left hand column, which is all the value stuff, I think large values are like 105% and I think mid value is 101%. And then going out to the top right-hand corner is 165% or something if its long run mean Whatever that large growth is at 165% of its long run mean. I don’t know. Personally, I have a lot of difficulty working out which one’s going to outperform because they are at a discount, but they are–
Jake: Better also.
Tobias: Yeah. The smalls are worse. I don’t know if this is like a product of– I think I said Sarb-Ox last time, Sarbanes-Oxley. It’s a million dollars more expensive where it was last time. I looked at million dollars more expensive to get listed as a result of Sarbanes-Oxley than it had been before that. So, what companies tended to do was to stay private for longer. Like Facebook where previously that might have come out public as a small– They just wait until it mammoth before they list. So, they have a chance of hitting the index pretty quickly, the big index. I don’t know is the answer but I have a slight feeling maybe it’s going to be mid is where you want to be.
Jake: Yeah. Tradeoffs.
Bill: I have nothing to add.
Growth’s Been Beaten Up
Tobias: Albert Bridge tweeted this up last week. Drew Dixon had this little take on what happens in the next big drawdown because growth seems to be expensive, but growth’s been so beaten up over the last, I guess, since February 12 last year was the date. So, we’re coming up on a year of growth being beaten up. Value has had a little bit of a run. I, honestly, don’t know how these aggregated numbers are working out. But the aggregated numbers are still saying the spread is as wide as it has ever been and value ran to like May, last year, and it’s been losing ground to the index ever since losing ground. None of the aggregated figures match what my intuitive narrative would say is going on. So, I honestly don’t know. I just try to buy cheap stuff. It’s flowing cash, and buying back stock, and not worrying about it too much at this point. I just hoping that it all works out.
Jake: Yeah. Bottom up.
Tobias: Bottom up.
Jake: [crosstalk] bottom up, folks.
Tobias: Yes. After all, [crosstalk] interest bottom up.
Bill: Well, I don’t know. Jerry Capp came out on Avalara or whatever at night. I think that ideas like that, not necessarily that idea but I could get down with buying smaller companies that have a very, very long growth runway and high structural margins like that I could get down with. Obviously, the nuances all matter.
Jake: Is it time to start picking through the growth wreckage yet?
Bill: I think so. My gut says, growth rallies.
—
Cathie Wood’s Portfolio – Some Crazy Valuations
Tobias: Yeah. There’s some stuff that’s expensive– When I look at Cathie’s portfolio as much as it’s down, I look in there and I’m like, “There’s some still some crazy valuations in here.”
Bill: Roku, I just haven’t quite gotten, too. But that’s one that I’ve been looking at and thinking about for a while. I don’t know. There’s– [crosstalk]
Tobias: Somebody sent me a chart that showed– not the hype cycle. The other one where they– [crosstalk]
Jake: [crosstalk] The hype.
Tobias: This is not the hype cycle. It’s something else. They just overlaid Ark over the– I haven’t shared it because I don’t have the source. I’ve asked for the source and the permission to share but when I get it, I’ll send it up. But basically, when we have the bubble run like that the tulip kind of pathway, there’s this run up to a huge peak, and then it pulls back, and then there are the dip buyers who come in pretty close to the top, and they dip by, and there’s a little rally, and that’s when you get the final flush. Basically, the two charts over, it’s kind of spooky how close those two charts are now. I know that laying one charter –
[laughter]Tobias: -is just complete bullshit analysis. But it’s an amazingly good fit. That was my comment. So, it’s funny. I’ll get some permission to share it and I’ll tweet it out. It’s interesting.
—
Bill: Oh, I got a follow up on Expel. I said that I would work through Expel on Value: After Hours in real time. So, here’s where my work is at. I have done some surveys of some of my friend group. I need to have a more diverse data set. I remain pretty concerned about the total addressable market here. At the end of the day, I’m just not sure that I’m going to buy how big it can grow into, but I am remaining open and trying to disprove confirmation bias. So, I talked to the Mercedes dealer today and they said that they rarely install it on anything, but the Porsche dealer installs it on a lot. So, I thought it was interesting that a Mercedes dealer is really installing it, but potentially, Mercedes owners don’t love their cars. That’s possible.
Tobias: It’s time, amigos.
Jake: Yeah, okay. Yeah.
Tobias: Sorry, JT. You got something to add?
Jake: Oh, I talked to actually the local Mercedes dealer in this area and something like 80% of the cars are just leased.
Tobias: [crosstalk] leased car.
Jake: Yeah, I got to wrap a leased car.
Bill: Unless they can tell you we’re going to hit you so hard on the paint when you bring it back that it makes sense. But I tend to agree with you. So, then, I go to like, all right, even if your fronts too grand, like how expensive does your car actually need to be? My gut tells me 50 grand and higher. And it probably needs to be dark paint.
Jake: Yeah, It’s a vanity thing more, right.
Bill: What?
Jake: It’s more of a vanity thing, too, isn’t it– [crosstalk]
Bill: I tend to agree with you. Yes, which is why I have a hard time trusting the growth.
Tobias: We are over time, amigos. This was fun.
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