In their latest episode of the VALUE: After Hours Podcast, Bill Brewster, Jake Taylor, and Tobias Carlisle discuss:
- Will Microsoft Bing With ChatGPT Destroy Google?
- Steve Jobs Would Not Approve Of Apple Today
- Is Meta Heading The Same Way As The CD-ROM?
- It Always Looks Like A Soft Landing
- Synthetic Biology – It Never Works
- Strategy, Competition, And The Value Stick
- The Reason Google Never Gets A Nosebleed Multiple
- Rivian R1S Gets Highest Ever Score From DeMuro
- Why Did Pixel Remove Facial Recognition?
- Why Do Big Companies Atrophy And Die?
- What Makes Elon Musk So Divisive?
- S&P500 Forward Earnings Growth Just Turned Negative
- It’s Difficult To Value Media Companies
- IBM – Biggest Winner To Biggest Loser
- Boomer Alert!
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:
Bill: Five times earnings and I bought it.
Tobias: What’s up, fellas?
Jake: Yo, how are we doing?
Tobias: It’s Value: After Hours.
Bill: During Hours.
Tobias: During Hours. It makes no sense.
Bill: It makes all the sense. It’s a vibe.
Tobias: It’s a vibe. Are we going to have a vibe session?
Jake: Mm. Mm.
Bill: Mm. I don’t know. We might talk ourselves out of a vibe session. The vibe session was last year. Now, we’re– [crosstalk]
Jake: To the moon again.
Bill: Now, we’re vibing.
Jake: Soft landing. It’s all good.
Tobias: [laughs] Santa Monica. Altamonte Springs, Florida. Milton Keynes.
Bill: Altamonte Springs? Where’s that at? I’m a google that.
Tobias: Santa Monica, first in the house. What’s up, Trey?
Bill: I’m going to google it for the last time. Next up, it’s being in ChatGPT.
Tobias: Deano in Townsville keeping the–
Jake: It’s 03:00 AM.
Tobias: Queenstown, congrats. Don’t know why you’re on this. Buenos Aires.
Bill: What did the guy say? He’s on Spring break?
Tobias: No, Queenstown. What did I say? Did I say that?
Bill: I don’t know.
Tobias: I had Queenstown– [crosstalk]
Bill: Where did this person say they were from?
Tobias: Helsinki, Norberg, Lisbon. What’s up, Portugal?
Bill: I think this person’s fake news– [crosstalk]
Tobias: That’s the top of the list of places to retire to in the world.
Bill: What, Portugal?
Jake: Mm. Supposed to be– [crosstalk]
Bill: They got a winter.
Tobias: Stirling, Scotland, what’s up?
Bill: Still got a winter. Is the homie in Nazaré or the [unintelligible [00:01:35]?
Bill: Is it a [unintelligible [00:01:36]?
Tobias: Nokia? I didn’t know Nokia was a place.
Tobias: Basingstoke, UK, Victoria, BC, what’s up? South, Newfoundland. I’ve missed a few, sorry, but that’s very cool. Seattle, what’s up? Fellas, what’s happening? This is a wild market. We’ve strapped straight back into growthy rocket ships.
Jake: Yeah, it’s all good.
Jake: Shitco or junkco rally.
Tobias: Shitco rally.
Tobias: Yeah. When [crosstalk] rally-
Jake: Someone else’s.
Tobias: -it’s because the fundamentals, because they’re cheap. When your stocks go up, it’s a shitco, right?
Jake: Yeah, yours is a shitco. Mine’s discerning. [chuckles]
Tobias: Value selection.
Jake: Nothing to do with interest rates. sir. [laughs]
Tobias: Yeah, this is a fun market. It’s completely missed value again. Alpha Architect finally updated their spreadsheet through to the end of the year. The spread is-
Tobias: -all-time highs. EV/EBIT, all-time highs. It’s crazy.
Bill: Wide spreads are the best spreads.
Jake: [laughs] I was going to make a bad joke about it’s spread wider than something. Then, I decided discretion was a better choice.
Bill: Well, I don’t go with that, which is why some people like you and don’t like me.
Jake: And vice versa. [laughs]
Bill: But those people are wrong.
Jake: Yeah, you’re right.
Bill: Anyway, they should like both of us. Anyway, what was I going to say? Oh, I was a little disappointed last week in myself. I’m off in that.
Jake: It’s a big club. You’re welcome– [laughs]
It’s Difficult To Value Media Companies
Bill: I didn’t articulate why the Warner Brothers– I’ve been thinking a lot. I said, “It’s not the kind of investment that I’d make anymore.” And Toby, you said why? I don’t think that I articulated what I meant well enough. I just think, you think about one-foot hurdles, and for me, that thesis is so not a one-foot hurdle. I think it’s one of those that on a spreadsheet can totally make a ton of sense.
I’ve just gotten more comfortable saying other people can make money in entities and I don’t need to make money in that entity. I’ve gotten really comfortable with the fact finally that I don’t have a hurdle that I absolutely have to keep up with. I can always park money in the S&P, or a value ETF, or somewhere. I can look at things swim by and I don’t need to try to catch a fish, even if it looks like a fish to everybody else.
I think it’s just like one of those things that I think it’s a lot harder than to pivot a lot of those brands than the bulls think and maybe that’s because I’m wrong. And if so, they can make money and I don’t need to care.
Jake: That’s a good place to arrive. I think you’re near Nirvana.
Bill: Yeah. I think it’s much healthier, right? I used to think that I needed to have an opinion on a lot of things. And I don’t think being on a show really helped that very much, but now I’m just like– [crosstalk]
Jake: [laughs] When you’re trying to keep your opinion quiet, everyone’s like, “No, tell us what you think. This is a podcast.”
Bill: Well, especially since I was so loud in the beginning, right?
Tobias: Beefy Capital says, “Low return on brain damage.”
Bill: Yeah. And look, if it goes wrong, I would kick myself. I’d be like, “I didn’t believe in it in the first place. Now, I’m in it. I’m only in it, because it is cheap on a spreadsheet. Now, the stuff that I didn’t like is coming out and what am I doing?”
Jake: Or worse. Price got cut in half and now do I double down or do I-
Bill: Yeah, I never would.
Jake: -run away?
Bill: Not now.
Tobias: He who ups and runs away lives to run away another day.
Bill: Well, something I think that despite all my shitting on oil back in the day, where I do think that there’s a lot of merit in that, is there is true asset value in those businesses. One of the things about media that I think is so difficult is, yes, back catalogs are worth something. But you keep a bunch of leverage on it, and there’s a lot of substitutes for time, and there’s no hard and fast thing to lean back on. At least, I think certain entities have competitive advantages. But if I don’t think that they have a competitive advantage, I’m just not going to play the game. Some of the ones that have an advantage, I don’t think are priced very attractively. So, I tend to not have much media exposure.
Jake: Especially on an EV basis.
Bill: Yeah. So, it’s where I’m at. But I don’t think I answered that appropriately. I think I half answered it. So, anyway, grinded my gears this week.
Jake: There you go. Errors and omissions, check.
Bill: Yeah, it’s right.
Tobias: TC, what do you got on tap for today?
Bill: I haven’t had to apologize to anybody for a mispronounced name in a long time. Maybe we should bring– [crosstalk]
Tobias: Yes, you are right. I’ve got one coming down. Don’t worry.
Bill: Right. Okay, cool.
Jake: Not a good idea.
Tobias: Julian Klymochko.
Bill: Oh, man, that– [crosstalk]
Tobias: I’ll apologize for that next week.
Jake: That can’t be it. [laughs]
Tobias: Sorry, Julian. I’m not entirely sure how to say your last name.
Bill: No, I thought we were worried you messed up the first name.
Bill: Klymochko is definitely right.
Bill: All right, anyway.
S&P500 Forward Earnings Growth Just Turned Negative
Tobias: He says that, “S&P 500 forward earnings growth has just gone negative. And according to Morgan Stanley, “The majority of the price downside in equities comes after forward EPS growth goes negative.” And he’s got a little chart. I’ll try and use our high tech–
Jake: Whoa. [laughs] Oh, boy.
Tobias: There we go.
Bill: Wow, that is really high tech.
Jake: This is sad.
Bill: This is why people come.
Tobias: You have no idea how expensive-
Jake: This is a new [crosstalk] for us.
Tobias: -it is to get the–
Tobias: Just freezeframe that and you can have a look.
Jake: Yeah. So, other times when it has gone negative, maybe that might be interesting to reference.
Tobias: Yeah, that’s a good idea. Let me look at that, so I can tell it to you. So, the other times when it has gone negative, it went briefly negative in 2020. Well, it went deeply negative, but we all know what happened then. 2015, 2016, do you remember that there was that shocking– value had a terrible year in, I think it was 2015. It had a pretty good year in 2016. It’s a while ago now. I’m sure– I think it was those two years. You don’t remember? [crosstalk] 2015.
Bill: I’m just shaking my head.
Jake: You mispronounced decade.[laughter]
Tobias: Well, there were many, but yeah. [crosstalk]
Bill: I’m almost certain 2015 is when I bought Freeport-McMoRan to December of 2015. Was that–? Yeah, that was to sell it for like a 50% gain. Yay. It would have been a– [crosstalk]
Tobias: Yeah, that was good. It’s a deep value.
Bill: 7x. 6x. [crosstalk] That’s why I’m good, folks.
Tobias: That’s a pretty good record.
Jake: You never go broke taking a profit though, Billy.
Bill: That’s correct. Why did I buy it? Because we banked a copper company and it was constantly in workout and I was like, “How much fucking worse can this get?” But I didn’t know how to hold.
Jake: So, other negative times, 2008– [crosstalk]
Tobias: Just all of the big ones that you could guess.
Bill: When at the times that it happened and we didn’t have a crash is maybe– [crosstalk]
Tobias: The only one was 2015, 2016 but we had a pretty nasty drawdown at the end of that year.
Bill: Yeah, a lot of stuff got cheap then. UMP got cheap then, I think, if I recall correctly.
Tobias: That was an interesting year. That was the inflection year. That was when Jake wrote his article about the spread being very tight.
Bill: Tight spread’s no good.
Tobias: No, it’s not. Anyway, it’s just a datapoint. Just while we’re having this monster rally, I just pulled a bit of– [crosstalk]
Jake: Tighten the spread, go back to bed. [chuckles]
Bill: That’s right. Yeah.
It Always Looks Like A Soft Landing
Tobias: The other one I thought was fairly interesting. So, Michael Kantro, who’s the gentleman who came up with HOPE, H-O-P-E. Housing-Something-Something-Employment. [laughs]
Jake: Something, something [laughs]
Tobias: It’s new orders, profits, and employment. Aye. I’ve had it hammered into my head enough times. No need to send me another email. He says, “It always looks like a soft landing.” So, he’s got quotes from 2007, 2000, 1990. It always looks like a soft landing.
Jake: So, everyone at this juncture says soft landing is what–?
Jake: Okay. So, we should not listen to soft landing calls then?
Tobias: The Fed’s going to engineer a soft landing.
Tobias: Maybe they will. Maybe this time’s the charm. [crosstalk] It never happened before, but you never know.
Jake: I hope so. [crosstalk]
Tobias: Surely, they are going to– [crosstalk] ChatGPT says, “Yes.”
Jake: Yes, we finally got the AI developed enough to– [crosstalk]
Tobias: I’m sorry. I’m not able to comment on that.
Bill: What? ChatGPT?
Tobias: If you ask it enough questions and it’ll start giving you political answers– Politically correct answers.
Bill: Hmm, interesting.
Jake: That is odd, isn’t it?
Tobias: What’s tuned up in the backend? It’s trained on whatever it’s trained on and it says what it says.
Bill: Well, we’re all going to be that soon once chips are embedded in our brain. Thank you, Elon.
Tobias: Yeah. I like Josh Wolfe’s approach better, where you can get a little band on your arm and then through– I think it’s AI as well. Through AI, it looks at the muscle movements in your arm and the gestures, and it can understand what you’re thinking.
Jake: Even anticipate the movement of what your hand wants to do.
Bill: Here’s a hot take. [crosstalk] Imma remain analog.
Tobias: You’re going to be Denis Leary in the new version of Demolition Man, where– Remember they were all living underground and he wanted to drive a V8 and wanted to be able to swear without having credits taken away?
Bill: Yeah, I would lose a lot of credits. [crosstalk]
Jake: No three shells for you in the bathroom. [laughs]
Jake: Great movie.
Tobias: JT, what do you go on deck?
Bill: Yeah, save this episode, JT. Come on.
Strategy, Competition, And The Value Stick
Jake: Yeah. Spiraling out of control. So, I’ve got a little book report-ish on a book from this guy named Felix Oberholzer-Gee and it is called Better, Simpler Strategy.
Bill: Dude, is it green? Because it looked translucent.
Jake: Oh, yeah, it is green.
Jake: So, that’s [crosstalk] with my green screen.
Bill: Analysis, folks.
Jake: Wow, you’re ahead of the game. This came from a book recommendation from Michael Mauboussin in a podcast he did recently. I’m pretty much any time he brings up a book and says it’s good, like, it’s going to be an auto order for me and get to the top of the queue. And again, this one did not disappoint. Not the most amazing title, but actually, I was a little worried going into it, because Oberholzer-Gee is a business professor at Harvard, which I’m always a little bit skeptical about practicing versus academia and business. But in this instance, this is a great book. So, we can unpack some of the things that I enjoyed about that, if you guys want to eat some veggies right now.
Bill: We can do that.
Jake: All right. So, it’s actually very similar in some ways to the straws that I used in the rebel allocator of talking about price and value and cost, and how those moving them around against each other will reveal things about profit and brand or producer surplus and consumer surplus as it’s known in economics. But he uses a different thing that he calls a value stick. I won’t put any jokes into that, but [laughs]
Tobias: I’ve been beaten with it for the last decade or so.
Jake: Yeah, exactly. No more value sticks for Toby. [laughs] Oh, beaten or something else.
Tobias: Beating with it. Yeah, beating with it.
Jake: Okay. So, basically, he’s saying that businesses exist between these two key mechanisms and they’re really– The willingness to pay by the customer on the top end, like basically the output of the business and then the willingness to sell of the suppliers and the employees on the bottom end, which is like price and cost in a lot of ways. So, a business is trying to push up the willingness to pay and they’re trying to push down the willingness to sell as much as they can. So, you think about the iPhone for instance. Apple increases the willingness to pay of the iPhone by beautiful device design, easy to use, the social prestige of using it like you want to look cool, network effects of having a developer community that builds the best apps for that one. Whereas if you were trying to be like a third platform, a third phone, you’re not really going to get the developer talent as much.
Anyway. All of those things increase the willingness to pay by the customer. I’m a big fan of actually the jobs to be done framework when thinking through what is it that creates the value for the customer, but I won’t divert us onto a tangent onto that.
Tobias: I was going to say, what is that?
Jake: [chuckles] Well, at a lot of levels, it gets into the Austrian economics idea of marginal utility for every single feature and subjective marginal utility. It gets into like, how do you create demand? What is it that the customer actually wants? At the end of the day, you could sell them a quarter-inch drill bit, but they don’t really want a drill bit. That doesn’t do anything. They want a hole in something.
Tobias: Got it.
Jake: Well, actually they don’t want a hole in something. They want to be able to hang a picture. And so, that’s where 3M used this thought process to come up with those sticky tapes that go up on the wall as opposed to just selling you a whole to drill in and put anchor like, “What’s the job to be done here?” It’s like, “I want to put a picture up on my wall.” So, that’s the kind of thought that goes into it. So, basically, Gee says that, “The greater profitability comes from creating superior customer delight, greater employee satisfaction, and more generous supplier surplus.” So, value creation comes before value capture.
So, I’ll quickly go through some of the different ways that he breaks down increasing the customer’s willingness to pay. So, you have products and services. The greater similarity between products and the value that they deliver their value sticks, the greater pressure is that to compete on price. So, this is the typical commodity versus the differentiated product. He also has this idea that he calls near customers. These are all the people that you don’t know about in your business who– if you could increase it just a little bit for them, their willingness to pay, it would all of a sudden trigger them and there’d be maybe this tipping point where you could unlock a whole new customer batch that were previously a segment that wasn’t part of your customer base. They’re kind of a latent customer.
Then you have the idea of compliments. So, this is basically like, any product or service that increases the willingness to pay for another product. Razors and blades is a classic example. Think about how useless are roads, gas stations, and parking garages, if you don’t have cars. So, all those are compliments for cars and vice versa.
Bill: Cars? Yeah, pretty useless without any of those.
Jake: Yeah, right. So, there are compliments for each other. They increase the willingness to pay for both of them, because they coexist.
Tobias: [crosstalk] cars.
Jake: Yeah. Where we’re going, we don’t need cars.
Bill: More roads.
Jake: Network effects, which people talk about that a lot, that can also increase the willingness to pay. You think about the first fax machine, relatively useless. The 10,000th one, very useful, because you can connect to this network. Now, how about decreasing the willingness to sell from the inputs into your business? Employee satisfaction, non-salary benefits. I was actually thinking through in the last month or whatever, we’ve made fun of those day in the life videos from the tech companies. But I think I’ve changed my opinion on that. What if instead– it’s not a bad look, but instead management is happy that they’re putting them out there, because then everyone wants to come work there. They see how awesome it is and maybe they take a lower salary. So, you’re perhaps lowering the willingness to sell by effectively advertising all these cool extra amenities.
Bill: I don’t know, dude. I don’t know. This one’s hard for me to get on board with, but okay.
Jake: Keep an open mind, Billy.
Bill: We’re dealing with something in my house that makes me question this, but we can get back to that at the end.
Jake: Well, please share that, because I’ll just keep going otherwise.
Bill: I’m going to sound like such an old man.
Jake: Boomer alert.
Bill: Yeah, this is some boomer shit. My wife was pretty successful, worked at a big firm. She now teaches as an adjunct professor for a law school. She gave somebody an assignment and the person said to her, “Well, I can’t let law school get in the way of my life.” This is supposed to be a high-performing individual. And then, the other person didn’t do any work and then accused my wife of being sexist, even though she’s also a woman. I’m not sure where the youth’s minds are, and I know that I am officially turning into one of these people that is the old man questioning the youth and maybe that’s like one or two people. But I am worried about whether or not people expect that “day in the life” type stuff and whether or not you want those kinds of people in your organization.
I am an ist. I am an ableist, I figured it out, and I’m also a hard workerist. Those are the people I want around me and the rest of the people can get fucked. I don’t want to attract people that like the “day in the life” people. Okay. That’s where I’m at with this.
Jake: Toby, tiebreaker. Words of wisdom. [chuckles]
Tobias: Is it any different than it’s ever been? Has it always been that way?
Bill: Probably not. Social media seems to throw some water on that.
Tobias: [crosstalk] some like Sumerian tablet with a chisel on it, some complaint about the youth?
Jake: The lost youth.
Bill: Somebody probably said that about me when I was at the bank. So, I get it. But boy, ooh. I don’t know. Anyway,-
Tobias: I wanted to [crosstalk]
Bill: -sorry to interrupt.
Tobias: -that sort of attrition just happens naturally. Law school is somewhat demanding if you have an attitude that– You can’t let it interfere with your life, you might not be able to get through and that might be the first filter.
Bill: These are second year doing an additional course.
Tobias: [crosstalk] to graduate. [crosstalk]
Bill: Yeah, that’s fair. Yeah, the one came– [crosstalk]
Tobias: [crosstalk] you could get employed.
Bill: Well, the one, she didn’t give a good recommendation, so then the teacher didn’t give her a professional recommendation. Now, the woman’s pissed at my wife. It’s like, “How about you fucking do some work and then you’ll get the recommendation?” Anyway, I digress.
Jake: That’s a low rates phenomenon. [laughs]
Bill: Yeah, there’s definitely consequences. Thanks– [crosstalk]
Tobias: Thanks, Jay Pal.
Tobias: That’s not Pal’s fault, I guess.
Jake: Oh, yeah. he just inherited– [crosstalk]
Bill: It’s probably Bernanke’s fault. Sowing the seeds of laziness a long time ago.
Jake: I think we can go further back.
Tobias: Yeah, I think so too. But I don’t think that Bernanke or Yellen did anything particularly heroic on the way through either.
Bill: All right. Sorry.
Jake: That’s all right. That’s a good diversion.
Bill: You just triggered me.
Jake: [laughs] [unintelligible 00:22:19] snowflake.
What Makes Elon Musk So Divisive?
Jake: All right, so back to employee satisfaction. Actually, flexibility of work hours, it turns out to be very highly valued. And also, even passion for what the work that you’re doing. There’s a lot of books about finding your passion and doing passionate work, but that actually plays into– If you have a bigger mission, Toby’s Invincibles idea where you stand for something important and that people can resonate with that. you’re lowering willingness to sell in a lot of cases.” So, you have the high ground, right? How would you call that, Toby? What’s the book say?
Tobias: There are people who’ve ignored a lot of the problems with Tesla, because they’re so excited about the mission and Elon Musk. It clearly works. But then again, there might be another side to that too where if they get upset with him, then it goes the other way too. We’ll see.
Bill: SpaceX is very good marketing for him.
Bill: I said something about him last night, because I was sitting at dinner and a shuttle went up. I was like, “I don’t know. Part of me gets pissed off at Elon and part of me loves him.” And everyone at the table was like, “I can’t believe any part of you is pissed off at him.” I was like, “All right, welcome to the cult, losers.” I said, “That’s because you don’t care about securities fraud.”
Jake: Ooh, yeah. Well, not convicted though, right? Isn’t that what I saw?
Bill: That’s right. That’s correct.
Jake: Must have quit.
Bill: Sorry, Samson. Thanks for tuning in.
The 90th Percentile Are Way More Productive
Jake: All right. By the way, all of this stuff, I think actually would make for a pretty reasonable checklist for you to think through every single business that you own. How are they increasing customers willingness to pay? How are they subtracting the suppliers and employees’ willingness to sell their services?
So, let’s talk about suppliers. You can actually do things as a businessperson to lower the cost to provide it to you, easier to work, aligning incentives correctly between you and your suppliers as much as you can. I think there’s a saying that, “Supply chains are people too.”
I think a lot of times you lose track of the fact that these are also businesses with people behind them trying to have a margin, trying to exist in an ecosystem. I think a lot of times businesses don’t look back enough to the people who are helping support them that way. So, thinking of them more like partners and then also being careful about who you get into bed with, if you’re a partner like anything who do use for your suppliers.
Bill: Big time applies in life.
Bill: Be careful who you get in bed with.
Jake: Yes, agreed.
Bill: And who you partner with.
Jake: So, then he starts talking about firm productivity. I didn’t realize this, but within industries, there are massive deltas between the 90th percentile most productive and the 10th percentile.
Tobias: This is the companies?
Jake: Yeah, these are companies.
Jake: So, in the US, there’s 2x the output for the 90th percentile compared to the 10th percentile [crosstalk]
Tobias: This is intra-industry. So, this is same industry.
Jake: Intra-industry. Yeah, same inputs even. But the outputs because of productivity just massively different.
Tobias: Because you get a scale advantage? Productivity is one of those things that I’m a little bit suspicious about what it actually measures, because I always see these, “Productivity’s up, productivity is down.” I don’t know exactly what it measures.
Bill: I think the beer industry might be an interesting example of what Jake’s talking about. My perception of Heineken and Sam is that they’re much closer to, I think, the things that Jake is talking about. And my perception of AB InBev is that it’s not nearly as close. I didn’t listen to people when I thought AB InBev was a decent investment and they were like, “You’re not paying attention to some of the cultural stuff under the hood and the fact that they’re trying to extract too much from the system. You need to look at what Heineken and Sam are doing.” I got myself to the old odds priced in type thing, but I really think I missed some of the stuff that– I think AB InBev, at least for a time, went through a non-win-win-win period and I think it really bit them.
Jake: Yeah, productivity between India and China, the delta is even more pronounced. So, between 90th percentile firms and 10th percentile, 5 to 1 differences. I have no idea why that is, but it’s provocative.
Tobias: If you get scaled, does your productivity go up? So, the bigger you get, the more productive you are, because one person can do more with a bigger factory? Something like that?
Jake: There’s some of that. I think some of it’s like learning curve related, but we’ll get into that a little bit.
Minimum Efficient Scale – Explained
Jake: That’s this other idea that’s called minimum efficient scale. So, basically, what business volume do you need to be cost competitive within your industry? Depending on whatever the industry is, there’s some minimum volumes that you need to even be in the ballpark of competition. And so, he has this example of Coke and Pepsi in the 1970s. They really scaled up their advertising and it turns out that both of them finished that time period with larger market shares than they started with.
Jake: Who lost out market share? It was all these smaller regional brands that couldn’t afford big national advertising and they were subminimum efficiency scale for the soft drink industry, basically. They went broke and died out and it left two oligopoly type of leftover dynamics. So, that’s interesting to think through.
Tobias: That phenomenon has happened in lots of industries, lots of consumer-packaged goods type places. The advent of the internet and Instagram and other more fragmented marketing has meant that has reversed a little bit. We’ve got microbreweries and lots of different little types of soft drinks now, which is probably a good thing.
Bill: We’ll see if it reverts though. The ATT stuff that Apple threw down, you could argue that’s going to end up hurting the ability to enter– [crosstalk]
Tobias: What is that? [crosstalk]
Bill: Ah, it was the ability for-
Bill: -Instagram and Facebook to, yeah, figure out what you were doing after you saw an ad and then retarget you and stuff like that. Now, I think that there is a strong argument to be made that the ability to track, while it pisses people off because of privacy, I think it helps small business a decent amount and I think that small businesses are on the margin hurt. So, we’ll see.
Jake: Yeah, I think you’re probably right. Toby, some of that minimum efficient scale is geographical. And depending on the industry, some industries are global enough to be winner-take-all, and you end up with one or two dominant world players. But then a lot of times, there are scaling effects that don’t get past a certain geography and then you end up then with a lot of shattered or fractured marketplaces where there are winners within that instead of on a bigger scale.
So, it’s not a perfect like, “Oh, just the bigger you are, the more competitive you are until there’s some technological disruption,” which is true, but there’s a lot more fracture within that and there’s a lot more regionality and geographic constraints that will keep a network from getting– or keep an ecosystem from being dominated. The predator can’t move outside of the ecosystem well enough.
Why Did Elon Chose The Car Market?
Tobias: I think it’s a Bruce Greenwald analysis. I think he was talking about Tesla, or it’s been applied to Tesla to say that there’s a reason why Musk was able to break into the car market versus, say, something else like soft drink market or something like that. It was because there were x number of units turned over in any given year and you needed some tiny portion of that in order to be able to enter the industry. Was that Bruce Greenwald? Do you remember?
Jake: That sounds like– Was that in Competition Demystified or maybe it was in one of the–?
Tobias: It feels like that kind of analysis. Yeah.
Bill: I know that he does something similar when he’s trying to measure the duration of a moat. He looks at market share changes and how long that is– [crosstalk]
Tobias: This is the other end of that analysis.
Jake: So, last wrap-up thing, Oberholzer-Gee talks about how– Actually, stakeholder capitalism, we’ve talked about lots of times on the show about recognizing all of the counterparties within a business and how they’re impacted by it and the good for society that can be done. There’s no shame in trying to increase the willingness to pay for a customer, because they’re getting more perceived value out of it. That’s what you’re trying to do, is make them feel good about– like delight them. I think it’s easy to forget that business can have that positive effect in society sometimes.
Tobias: Who does that? Apple? Do you think?
Jake: Who does stakeholder capitalism well?
Tobias: Who does the increasing the ability to pay or increasing the willingness to pay? Because Apple has a few little tricks like that. If you don’t have an Apple phone and you’re in an Apple group chat-
Jake: Oh, you’re green.
Tobias: -the different color. Yeah.
Bill: It’s hilarious because WhatsApp is a better messaging system, period. But Americans for some reason don’t use it.
Jake: Yeah, it’s weird, isn’t it?
Bill: Yeah. Well, you can’t– [crosstalk]
Tobias: I do it from my Pixel.
Bill: No. Well, you’re lucky you’re married-
Bill: -otherwise you’d never get laid.
Bill: Yeah, there’s a ton. I just can’t think of any.
Jake: Every business is trying to increase their willingness to pay. Any ad you see on TV or on the internet or anything is an exercise in increasing willingness to pay.
Steve Jobs Would Not Approve Of Apple Today
Tobias: Well, I just think who does it well. I thought Apple is an example of who does it well, because I say that as someone who recently purchased a new Apple computer. I like the 27-inch. It’s all packed into one. Now, you’ve got to buy two. So, you got two power cords to plug in, which meant I needed a different sized adapter.
Jake: Plus, a second mortgage on your house to get the computer.
Tobias: They’re expensive. And on top of that, it doesn’t have as much storage as my last computer, which was like five or six years old, because I think they want to push everybody into the cloud. It just pissed me off. I thought this would never have happened under Jobs.
Jake: [laughs] Is that right? I don’t know.
Tobias: It just feels like they make these tiny little– You need some maniac at the top who stops the camera from sticking out of the bevel and stops the, “No, we’re not going to have two power cords. We’re not going to do this, because it’s a little bit annoying.” All of those incremental changes that just make it incrementally worse over time.
Bill: Luxury is coming–
Jake: No USBs in my laptop, my new Apple laptop.
Tobias: No USBs.
Jake: What are we doing?
Tobias: What are you connecting with? Is that USC or what is it?
Jake: No, I had to buy a dongle that goes into the lightning port that then lets me plug HDMI and USB and anything else into it.
Bill: Oh, dongle.
Jake: So, I’m dongling right now. [laughs]
Bill: Luxury, right? I would say that is something that makes people want to pay more over time.
Tobias: Arnault figured that out. Bernard Arnault.
Tobias: Richest man in the world.
Jake: Yeah. What’s he worth these days?
Bill: I saw him yesterday.
Tobias: I don’t know [crosstalk] money.
Bill: He’s in the three-comma club.
Tobias: Tres commas. Yeah.
Bill: Yeah. Well into it too. I thought I saw $100 billion, but I could be wrong.
Tobias: He’s the wealthiest man in the world at the moment.
Bill: Yeah. There was an article about this [unintelligible 00:34:44] about who of his children are going to get–
Tobias: Yeah, I saw that too.
Bill: His kids are 21 and 28. You can’t take over a company at 28. Come on. Get a little watch company. Have fun with that.
Jake: [laughs] Cut your teeth on this.
Tobias: That’s not a bad idea. Start them on something small.
Bill: That’s what he does. He manages a watch company. I’m sure he’s got a G5. Probably has a supermodel girlfriend, a couple of Lambos, it’s not the end of the world.
Tobias: But is he happy?
Bill: You just don’t get to run shit. What?
Tobias: Is he happy?
Bill: Is he happy? Fuck no. His dad was never around. He’s probably got tons of time on the couch.
Tobias: Maybe he’s reading a lot of philosophy. Who knows? Maybe he’s getting– [crosstalk]
Jake: Well, it’s getting a little cathartic in here.
Bill: Yeah, sorry, I was talking about myself.[laughter]
Bill: It wasn’t my dad. It was my mom. Anyway, I digress. She was around. She was just drunk.
Jake: All right, what’s our next topic?
Why Do Big Companies Atrophy And Die?
Bill: Oh, I wanted to ask you. As you were talking, I was writing down notes. Do you think some of the reason that the big– other than law of large numbers, I’m trying to contextualize why that exists. Do you think some of the reason that the big start to atrophy and die is you get to a certain size where in order to continue to grow, you have to start to do things against the stakeholders that you’re referring to and then the ecosystem starts to implode on you, because there’s only so much money that you’re naturally entitled to in the world?
Jake: Yeah, it’s a good question. What’s a good analogy?
Bill: I’ve been ranting about Disney for almost six, seven, eight months now. They just pushed too far in the parks. It’s too far. I just wonder if it’s a function that they have this huge enterprise value, and they felt like they had to justify it, and they felt like, “We got to make some short-term decisions–” I think they’re going to fix it. I don’t think it’s a permanent blemish on the brand, but it’s just an example that’s prominent for me right now.
Jake: So, in nature, there are anteaters that literally eat ants for their sustenance. But ants as a defense can swarm the anteater and literally climb in and choke off by suffocating him or her– well, I guess, there’s probably male and female anteaters, I believe. But suffocate the anteater by swarming. That might be analogy of if you screw your customers over too many times, they may swarm in some way and move against you. Any one individual is breakfast, but as a big enough group, they have power and can inflict damage.
Tobias: I’ve said this before, but it annoys me the way, for example, the airlines. So, the airlines just unilaterally screw over their passengers all the time and they know it doesn’t matter, because the people who get the complaints, like minimum wage standing at the front door, not getting paid until the door closes, I just think that’s wrong.
Bill: I have a soft spot in my heart for airlines. It’s a pretty good value.
Jake: Oh, it’s amazing value. What’s the alternative? You’re going to take a train for five days- [crosstalk]
Tobias: Well, that’s fair.
Jake: -a flight for five hours.
Bill: Or you have some really luxury experience and all the airlines need to be nationalized, because they can’t make any money. There’s a long, long history of pleasant airline experiences leading to bankruptcy. It’s a shame they have to be buses to work. I don’t disagree with you, but the problem is at the end of the day, when you look at how customers vote when it comes to airline travel and all you got to look at is Ryanair, Spirit, Wizz Air, Volaris, I don’t care what the ULCC that you’re looking at, the ultra-low cost carrier is, the load factors are huge, the people are always bitching, and they’re always rebooking.
Bill: Because people on the travel side, they always [crosstalk] what they watch.
Tobias: Fair enough.
Jake: They want cheap.
Jake: So, this is the problem. This is what this book would tell you about that is that you can’t create very much of a differentiated value experience in an airplane. You can, but it’s not insanely different.
Bill: Yeah, facts.
Jake: The back of the plane arrives at roughly the same time as the front of the plane. So, if that’s the case, then price becomes the thing that you have to compete on. That’s why then the low-cost providers tend to win out. Like you said, people reveal their preferences by rebooking even though they say, “I’ll never do that again.”
Bill: Yeah, I like that. [crosstalk] What’s that book called?
Tobias: I got a good question here from Samson.
Jake: Better, Simpler Strategy: A Value-Based Guide to Exceptional Performance.
Tobias: That’s a good name. I thought that you’re– [crosstalk]
Bill: It’s a name that sells.
Will Microsoft Bing With ChatGPT Destroy Google?
Tobias: I got a good one from Samson here. “Is Microsoft Bing with ChatGPT going to destroy Google?”
Bill: It’s not my favorite thing as a Google shareholder, but the majority of my net worth is in Microsoft relative to Google. So, I don’t know. I don’t think it destroys it. I don’t think it’s great. You’d rather it doesn’t exist if you’re long Google.
Jake: I find that hard to believe that they haven’t been working on something in this route for quite a while.
Jake: Google. Yeah.
Tobias: I thought they announced that they have something coming out.
Tobias: I think it was like Aidan or something like that.
Tobias: I’m sure they have something, right?
Bill: I don’t know how good Google is at making consumer products. I love you Googlers, I really do, but something that makes me nervous about Googlers is they might just be like a little too smart for the average human. They may not know how the average person interacts with.
Tobias: But you are also smart.
Why Did Pixel Remove Facial Recognition?
Jake: Is that how you end up with a Pixel phone? [laughs]
Bill: No. Oh, maybe, maybe.
Tobias: I’ll [crosstalk] Pixel phone, but again, the Pixel phone, the last phone had face identification and this one’s got a thumbprint. I don’t know. Why would you go backwards? I think it gives them better bar– I think it gives them better old battery lives.
Jake: I like the thumbprint.
Tobias: As opposed to the face? You don’t just like looking at it and it opens?
Jake: No, actually, I like the thumbprint better.
Tobias: It should give you the option then, shouldn’t it? Turn it off. Hey, increase your battery life by turning it off or leave it on and have it turn on when you look at it.
Jake: Yeah, that’s fine.
Bill: You can choose to go the way of the future or you can go back to being a Luddite.
Tobias: It just seems funny that they go backwards. The phone beforehand had that face feature and it’s disappeared on this new phone. A little bit frustrating.
Bill: Well, I don’t know what to tell you, man.
Tobias: People don’t like it.
Bill: There are the problems you have to deal with.
Tobias: Living in the future, it’s still pretty good. It’s still pretty good living in the future to be fair, yeah.
Jake: Yeah, living a rough life.
Tobias: These are real first world problems, aren’t they?
Jake: Yeah. Oh, my God.
Bill: Yes, they are.
Jake: Ugh, my phone doesn’t open the way I want it to open.
Tobias: To be fair though, I am talking about it from an investment perspective, and I think that incrementally all these little things that they do– [crosstalk]
Jake: They’re symptomatic of–
Tobias: Our house owns stuff that is Apple, because we own other things that are Apple. We might not have gone the Apple option, if we didn’t already have an embedded Apple ecosystem here and it makes it hard to make other stuff talk to it.
Bill: This is the bull case.
Tobias: So, at some point, maybe you flip the other way. That’s existed before. It’s not like it’s impossible that it’ll go away.
Bill: It’s not impossible, but you probably still use Excel.
Tobias and Jake: Yeah.
Jake: Although I’ll like– [crosstalk]
Bill: Oh, it’s kind of a sticky.
IBM – Biggest Winner To Biggest Loser
Jake: I’ll get the numbers and the dates wrong, but I put up a tweet, I don’t know, maybe a month ago or something about IBM. The highest amount of money ever made in a year, I think it was 1988, maybe. Best ever. And then I think it was nine years later, the most lost money ever in a year.
So, you could go from being the absolute dominant and just unassailable. No one gets fired for hiring IBM. It was a cliché practically. To then– and also ran relatively quickly, especially with technology. I don’t know if today’s phones, if you’d even call them technology anymore and if they’re really more of a– They’re not CPG, but they [laughs] almost feel a little bit closer to that than they do high technology.
Bill: I think Buffett would say they’re CPG.
Tobias: Yeah, that’s probably fair. What about the browser? Does everybody use Chrome? What’s Microsoft’s [crosstalk] browser like?
Jake: I think over 50% is Chrome. I don’t know. I have to look. But I’ll look at it.
Bill: Yeah, the key is how much you have to pay for iPhone Search and whatnot. Look, I think ChatGPT is a really interesting product and I hope for Google’s sake that they release something close to it sooner than later, because I do think that there’s a risk that people start going over because it’s fun. And then, if they form the habit of going there because it’s fun, that could be a problem.
All else equal, you would like to have a monopoly on eyeballs. Anything that infringes upon the eyeballs is not a great thing. You can argue, “Well, it’s not going to kill it,” or whatever, but I just think, look, if you’re investing, you’d rather not have to make an argument for why something is not a threat, just rather it doesn’t exist.
The Reason Google Never Gets A Nosebleed Multiple
Tobias: It feels to me like of all of the FAANGs, Google has been the one that’s been consistently cheapest. Apple cycles a little bit. Microsoft has been consistently just expanding multiples. What else is in there? Amazon. Amazon, pretty expensive most of the time. Whereas Google, for some reason, doesn’t really ever get a nosebleed multiple. It just doesn’t ever get really expensive. Why do you think that is?
Jake: It’s the black box problem of how much would you pay for a business that earned all of this money, but the dollars never came out of the black box. What is it worth?
Bill: You ain’t never seeing that shit.
Jake: Let me be more concrete. The dollar that’s generated within search is amazing, massive, maybe the best business to ever grace the planet Earth. But then what happens with the money after that? That’s been the question mark for a long time. Therefore, if you’re indexing off of a multiple of that earnings, that then who knows where they go, they’re going to always look cheaper relative to other things, where I think the market has perhaps correctly perceived that the incremental dollar kept within the business of Apple or Amazon or Google– or sorry, maybe Meta at one point, maybe not recently, but was going to be reinvested in a higher ROIC project than what Google was going to do. So, that’s my take.
Is Meta Heading The Same Way As The CD-ROM?
Tobias: Meta set a pretty stunning rally recently, because they brought up the $40 billion buyback and they had $40 billion in cash. And so, that means that they’ve got to put some fetter on Zuck’s spending with respect to the Metaverse.
Bill: Mm, that was a cheap stock, man.
Tobias: No dispute from me.
Bill: Yeah, I don’t know. There was that guy that popped in the comments that said, “I never say anything worth listening to.” I told him, I said, “Meta is cheap,” and that was under a hundred. So, you’re welcome, asshole.
Jake: [laughs] Not investment advice.
Bill: Yeah, that’s right. We’re just discussing thoughts.
Jake: Yeah, just for fun.
Bill: No, I don’t know. They brained in their capex. They use the word– What did they use like?
Jake: It’s a year of efficiency.
Jake: Discipline or whatever. Yeah, efficiency, like 15 times, 18 times, or whatever.
Jake: They found Jesus in discipline with their cost, which I — [crosstalk]
Jake: I still think the bet fundamentally comes down to, do you think that Zuck someday, either, let’s say, two or three years down the road, looks at the results or lack of results and can make a rational decision on his version of the Metaverse? A lot of the capex spend is family of apps. A lot of the capex spend is– [crosstalk]
Tobias: Have you seen the Metaverse?
Bill: Have I seen inside it?
Bill: I had been inside it.
Tobias: Have you seen a corporate version of it?
Jake: Is it warm?
Bill: No, I have not done that.
Tobias: I’ve seen it and I got some 1990s kind of–
Tobias: What was that CD– Everything was going to be on CD-ROM and it was all multimedia. It was just like, “Ugh, good luck.”
Bill: The man has earned the right to pursue this, but he has not earned the right to pursue it in perpetuity. So, we shall see whether or not he can be rational. I think he can be.
Tobias: But it’s still a good business. Somehow, the blue website is still growing.
Bill: Yeah, overseas and whatnot.
Tobias: WhatsApp undermonetized.
Bill: WhatsApp is a heck of a property. Let’s see if he ever monetizes it for real for real. But yeah.
Tobias: What did they spend on that? is it like $40 billion?
Jake: I think it was $20 billion.
Tobias: Yeah. $20 billion.
Bill: I don’t know. Don’t know off the top of my head.
Jake: Top of my head, $19 billion.
Tobias: Yeah. YouTube at a billion was probably, $1.65 billion, whatever it was, probably one of the all-time great buys– [crosstalk]
Bill: Yeah. Instagram was pretty good too.
Tobias: Instagram was– [crosstalk]
Bill: Instagram is pretty good too.
Jake: That was good.
Bill: I do think Google’s AI capabilities, from what I read, I think it makes the cloud product quite good. I don’t know how differentiated those products are, but to the extent, they are, I think AI is helping Google in the cloud.
Tobias: Has AI just become a complete commodity? Have we already commoditized AI?
Bill: It’s very possible, it does. I don’t understand how many– I get that AI people say that you need so much data in order to have this AI advantage.
Tobias: “$16 billion for WhatsApp,” Austin Reynolds.
Tobias: No, $19 billion in 2014.
Bill: Dang. That’s right.
Tobias: That’s a big dollar.
Bill: Austin, Google and you versus Jake and his brain, just lost.
Tobias: ChatGPT said $16 billion.
Bill: Oh, there you go.
Jake: ChatGPT. [laughs] But it was very, very confident about that $16 billion number.
Bill: That’s right. It made you really believe it.
Bill: Yeah. Anyway, I just don’t know. I understand you need a lot of data. I know that everybody says you need a lot of data. There’s a part of me that questions, do you actually need that much data or is it just a bunch of people that are dependent upon telling you that you need a lot of data in order to justify their jobs telling you need a lot of data? I don’t know. N equals 30 is statistically significant. No doubt, more inputs can increase your confidence interval. But once you’re 99% confident, how much does it really matter that you’re 99.9% confident? I guess, in theory, quite a bit, but how much does that cost? I don’t know.
Jake: Distribution of outcomes, fact tales, that can change your–
Tobias: I heard Apple makes $8.5 billion dollars out of Apple Care every year and very rarely gets– Nobody cashes it in. [crosstalk]
Bill: Yeah, that makes sense. It’s very smart.
Tobias: That is smart.
Jake: Yeah. It’s like an insurance that no one’s ever going to put a claim in on.
Tobias: “Tesla needs to introduce some Tesla Care.”
Bill: I think that the cost of fixing on a Tesla is a little bit different than Apple’s. [crosstalk] And the motivation too, right? I don’t know, my Air Pod breaks and it’s old. Maybe I just replace it. If my Tesla does, I’m definitely going to call somebody.
Jake: Yeah, probably less slippage there.
Tobias: Well, just do it for the seats then.
Tobias: Do it for the interior. Do it for the flamethrower.
Rivian R1S Gets Highest Ever Score From DeMuro
Bill: We’ve been looking at EVs. That’s across my mind. Yeah.
Jake: Anything good? Have they come down in price at all?
Jake: That’s not the future.
Bill: I mean, they may have. [crosstalk] It’s not true. Tesla, I guess, cut the cost of their– We’re looking for an SUV.
Jake: Okay. What do they have? What are you looking at?
Bill: I don’t know. Right now, we’re looking at Rivians. He’s got the highest Doug Score ever. You know that guy Doug Damato on YouTube? Doug does reviews. I’m pretty sure his last name is Damato. If it’s not, sorry for the disrespectful.
Tobias: It says [crosstalk] and pizza places.
Bill: Yeah. Well, he gave the highest Doug score ever to any car was the Rivian SUV.
Tobias: I’ve seen a few on the hill here.
Jake: What do you think?
Tobias: This is the SUV style, rather than– they’ve had– The truck style has been out for a while, but the SUV has just come out. They look good. I don’t know what they cost. They are like $75,000 or something.
Bill: Yeah, it might be more.
Tobias: That’s a price I saw a long time ago.
Bill: Yeah, I don’t know.
Tobias: Do they have that Tesla model where you buy them directly from Rivian or if have you got to go to–? Is it another dealership?
Bill: I don’t even know. We’re talking about putting a downpayment on getting on a waitlist. So, she was on the website today, and I haven’t done full research, but we are looking. We are in the gathering stage-
Jake: That’s as good as– [crosstalk]
Bill: -of information. Yeah. Polestar? Polestar, I’m pretty sure that’s a Volvo product, but maybe I’m wrong. I don’t know. I don’t know what I’m talking about, but I never do.
Jake: I thought you were a car guy.
Bill: I’m not an EV guy.
Bill: But I do think it makes sense. I want one to bop around town. I don’t know, we have a Volvo now and it’s like coming up– It’s eight years old. I’m worried I’m going to have to replace the engine. So, I was like, “Should I just get an EV?” But then I was like, “What if I just replace the engine? That’s way cheaper than buying a new car.” So, I’ll probably just replace the engine and then have it for another three or four years and then buy the EV.
Tobias: People actually drive them, is the charging an issue? Are you able to charge them sufficiently?
Bill: Oh, yeah. My grandma’s got one. It’s fucking sick, man.
Tobias: Is she doing a lot of driving?
Bill: Well, not anymore. She just parks– [crosstalk]
Jake: Not for a long trip though, right? It’s only good for just around town.
Bill: Look, the supercharger stations are legit. It takes you a little while, but how many times do you actually go more than 300 miles, for real?
Jake: Yeah, it’s pretty rare.
Bill: Yeah. So, if you live in a warm climate and you’re not going around, I don’t know. If you don’t go over 150 miles, say, I think that’s pretty okay.
Tobias: Are you holding out for the Cybertruck?
Jake: Get on an airplane, if you’re going to drive 300 miles. Let’s see– [chuckles]
Bill: I enjoy driving, but yeah.
Tobias: It takes you as long to board an airplane and fly and disembark and get you all the taxi [crosstalk] and what other stuff it does just to drive.
Jake: Yeah. What’s the breakeven? It’s like 500 miles or something?
Tobias: Is it 500?
Jake: I don’t know.
Jake: I saw it at one point. I can’t remember what it was. Something like that.
Bill: Yeah, 500 seems a little far, but 300 is roughly 5 hours, if you drive like a pansy. The one problem that I do think the EVs have is if you really get on the Teslas, their range is not the marketed range and they are really fun to get on. So, you can watch that thing go down. But you can do the same thing with a gas car if you stomp on it.
Tobias: The market has had a monster rally over the last three months, four months.
Jake: Definitely. Year to date, at a minimum.
Bill: Commodity is rolling over, bond spreads coming in, equity is going up. Risk on, baby.
Synthetic Biology – It Never Works
Tobias: Do you want to revisit our estimates for higher or lower to the end of the year?
Bill: No. It’s February.
Jake: Yeah. There’s a lot of time on the clock.
Bill: Also, if you were going to have a bear market rally, this is what it would feel like. Just enough to get people into FOMO, to pile in to get their face ripped off, because that’s what market should do. On the other hand, the re-bubble is fun.
Jake: Oh, it’s tough to short in this environment?
Bill: Yeah. Well– [crosstalk] 2022 is the year of the short seller.
Jake: You got memestocker stock still somehow like– I don’t know, GameStop or– Bed Bath & Beyond I saw the other day was up some crazy amount.
Tobias: Oh, it’s nuts. All those stocks.
Jake: What is happening?
Tobias: Bed Bath & Beyond, yeah, that’s another head scratcher. If it’s close to bankruptcy, if it gets that cue, it’s going to rock it. [laughs] [crosstalk] cue at the end.
Bill: The next guest on my pod talks about it and I am not at all saying to get excited about this as an investment, but this company, Amyris, the ticker is AMRS, they’re doing some wild stuff with synthetic biology where they’re basically turning sugar– They’re using yeast to turn sugar into like bunch of molecules.
Tobias: Not going to work.
Tobias: None of that stuff works.
Bill: I don’t know.
Tobias: Not going to work.
Bill: We’ll see.
Tobias: Not going to work.
Bill: Well, we’ll see, That’s what people say until things work.
Bill: Got big time money behind them, but I don’t know that I’d invest in–
Tobias: How I know that it’s not going to work.
Jake: Like Theranos level money or–?
Bill: No, they had a Kleiner Perkins, John Doerr, and then they had Bill and Melinda Gates money at one point. They got some backers.
Tobias: After FTX collapsed and I saw some of the documents at the back of FTX, there’s no respect for any of those guys. Oh, my God. That should have all been disqualifying.
Bill: I don’t know. We’ll see, man. I think there’s a lot of exciting stuff going on.
Jake: Due diligence is a hindrance in a bull market, Toby.
Tobias: It really is. As a VC, you don’t want to be doing any.
Jake: Don’t do that.
Bill: Well, yeah.
Tobias: Let’s [crosstalk] spill those bets.
Jake: I did see Adam Newman’s back with a new–
Tobias: Pretty similar.
Jake: I watched a little minute clip of him talking about this new scheme.
Tobias: Compelling. Scam.
Bill: He’s a guy I’d maybe give money to. I’ll admit that.
Jake: Oh, no– [crosstalk]
Bill: Yeah. Small enough in a limited liability company at the right valuation.
Jake: Are you serious?
Bill: Dude, you’re just trying to flip it to somebody way bigger. I’m not saying you want to own the cash flow of it, but I get it.
Tobias: Fellas, we made it.
Bill: It’s a different game.
Tobias: We did it. We got there. Thanks, everybody.
Jake: We got to be better– [crosstalk]
Bill: It’s a bit of a beauty contest, but you’re starting very tiny with the guy that’s proven the ability to show beauty out of nothing. That’s worth a bet.
Jake: He could paint that Rembrandt.
Bill: Yeah. Well, look, [Jake laughs] isn’t that a lot of what being a VC is?
Bill: [crosstalk] Well, I said it.
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