VALUE: After Hours (S05 E15): Buffett’s Japan Carry Trade, Simple Rules Allow For Emergent Behavior

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In their latest episode of the VALUE: After Hours Podcast, Bill Brewster, Jake Taylor, and Tobias Carlisle discuss:

  • Warren Buffett’s Japan Carry Trade
  • Simple Rules – Intelligent Behavior/Complex Rules – Dumb Behavior
  • Never-Sell Done Right
  • Buffett: Paramount – “It Isn’t Fundamentally That Good A Business”
  • Working From Home Has Caused A Secular Change
  • The News vs The Truth
  • AI vs The Human Tribe
  • LVMH – Still A Great Business
  • Ray Dalio’s – Changing World Order
  • Future Not Bright For Commercial Office Space
  • Tesla Sales Rose In The First Quarter
  • Monte Carlo Style Investing
  • Buying Into Liquiditations
  • Stimmy Still Flowing Through The System
  • Diet Pills & Junk Food
  • The Downside Of Social Media

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

Jake: Lots of it.

Bill: Yes.

Tobias: We are live.

Bill: Bang.

Tobias: This is Value: After Hours. I’m Tobias Carlisle. We’ve got the old crew back together. It’s Bill Brewster and Jake Taylor. What’s happening, fellas?

Jake: Guess who’s back? Back again?

Tobias: Return of the Mac.

Bill: It’s nice to be here. The prodigal son returns.

Jake: [laughs]

Bill: No, man. Tell you what, I’ve enjoyed the guests. It’s been quite a list of heavy hitters. And the one that I am looking forward to the most is– Is it Cam Harvey? Is that how I say his name?

Tobias: Yeah, Cam’s next week.

Bill: This I am looking forward.

Jake: [crosstalk] Set us straight on a bunch of things we said that were probably wrong.

Bill: How are you going to temper yourself from saying, “Cam, how did you bail on your own signal, and didn’t you do that in ’09, and why aren’t you wrong this time?”

Tobias: To be fair to Cam–

Jake: To be fair.

Tobias: The reason is on is because he sent me a note saying, “I had mischaracterized what he had said.” So, he said that-

Bill: Oh, no.

Tobias: -he agreed with the metric that there was going to be a recession and he said it predicted roughly the timing and the length of it, but what he missed was the size of the drawdown. He thought it was going to be mild rather than what ended up happening, which was a generational crash.

Bill: Was it generational or are we kind of on the precipice of maybe having another?

Tobias: Well, it was the worst one.

Jake: Yeah.

Bill: Right.

Tobias: It’s in the-

Jake: It’s in the history books.

Tobias: -five or six worst that we’ve had.

Bill: Yeah, it’s got to be. It didn’t feel good when it happened.

Buying Into Liquiditations

Tobias: Yeah. Well, I was buying stuff that I thought could be liquidated for money. So, that was my mindset at the time. [laughs]

Jake: Yeah, I felt like a jackrabbit in a– [laughs]

Bill: The liquidations thing is interesting. I wish that I did stuff like this, but if someone smarter than me has gone back and looked– Every time that liquidations have been fruitful, I wonder what it would have been like if you bought– I don’t think quality is the right– [crosstalk]

Tobias: The liquidations, they do work-

Bill: For sure.

Tobias: -quantitatively over time. The only thing is that they’re just few and far between. But the returns are, I think they’re still pretty good. I haven’t updated it for a while, but I think they’re still pretty good. But it’s people were making that point to me at the time. You can go back and look on Greenback’d, people were making in the comments. They’re saying, “You’re buying this stuff because you’re afraid of this massive downside, but this is an opportunity to buy businesses on sale,” which I was just a little bit too green at the time to fully appreciate that. But I think that is, in fact, the right answer and I think that you should be buying better businesses on sale when everything goes on sale.

Jake: Yeah.

Bill: A time when I could see liquidations doing well is like now if we are entering more of a credit–” [crosstalk]

Tobias: It still worked. It worked along with everything else.

Bill: I don’t know. Dave Waters is in this, and the homie with Bufo put me on it but retail something or another– They just delisted. So, you don’t get marked– [crosstalk]

Jake: Still got [crosstalk] for you.

Bill: So, you don’t get marked on things that are private. Everybody knows that.


Bill: They’re going to start to return the capital. If the cash comes in, it’s not– Look, I think quality right now, it’s hard to argue that it’s on screaming sale and the liquidation probably does 10% to 15%. A lot of it’s a return of capital. So, it’s on a tax advantage. This is the type of opportunity I could see where they– [crosstalk]

Tobias: I don’t think you actually get the capital out of them for the most part. I think that it’s mostly just the stock price finally responding. And then when it does respond, you have to sell out because you’re in that– Graham used to say it was two years or 50%, whichever came first, which I actually think truncates your winners in that. I don’t think that’s what you want to do. I think you want to be holding them when they’re cheap and selling them when they get closer to value, which is why I think that buying businesses through that period is a better idea, because the discount will close, but then on top of that, you’ll have the run of the reasonably good business on the back of that.

I’m not saying you don’t have to go and buy Microsoft in that scenario. I’m not saying you have to buy the very best thing in the market. I’m saying you just need to buy something that’s got a business attached to it that you can then ride tax consequence free for like maybe five years, maybe more than that.

Bill: Yeah.

Tobias: Let me just give a shoutout. We got Gothenburg. Stirling, Scotland. Phoenix. Oslo, Norway. Bendigo, Victoria, what’s up? Almaty, Kazakhstan? Cool. Austin. Brandon, Mississippi. CamHarveyville, what’s up? Tallahassee.

Jake: [laughs]

Tobias: We’ve got Ian Cassel in the house, Lancaster, what’s up? Santa Monica. Nashville.

Bill: To the guy from Kazakhstan, hit us up. Let us know what you think of Kasbi, K-A-S-B-I.

Tobias: Good spread. Jump over, everybody. Brandon, Mississippi. All right, dudes. Good stuff. What do we got on deck today?

Bill: I still find it amazing-

Tobias: Seattle.

Bill: -that 10 people are from that many places, but I digress. Ian with all his VPNs.

Tobias: New York, New York.

Jake: Yeah. What’s on tap for today? I’ve got a little segment I’ve been saving for, when I knew Bill was coming back, because I think it’ll be extra fun.

Bill: Well, this is exciting. I put on this shirt, so I got that going for me.

Jake: [laughs] It’s hurting my eyes a little bit.

Bill: It should not. I don’t know, I got a couple of things, but I don’t have anything really prepared. I never did before. [crosstalk] to now?

Monte Carlo Style Investing

Tobias: “Thoughts on distressed over quality in hard sell offs for the small investors? Fiat Chrysler kicked Ferrari’s ass since WuFlu bottom for example.”

Jake: Yeah, I think there’s something to be said there with– So, when I think back to my experience in 2008, boy, if you looked at rental car companies that had a lot of debt on them and were very existentially challenged at that point, you had 10 baggers coming on those. And there’s also a scenario where a lot of those turned into donuts though.

There’s a question mark of how much risk do you want to take versus the reward. I do think that there’s a lot of reward to be found when the question of existence going forward gets answered into the affirmative, and it gets taken out of that category. There’s big discontinuous jumps in market cap when you go from this is a dead company to this is a living company.

Tobias: It’s like a Monte Carlo type idea where you know that some of them are going to not work, but the portfolio as a whole, you’re hoping that some of them are going to have such massive returns that it’ll make up for the stuff that doesn’t work, the donuts.

Jake: Which speaks to your not wanting to truncate these power law outcomes by punching out at 50% and then eating a bunch of zeros on the other ones. I think you just have to know which game you want to play and recognizing that one is going to require some Tums to get you through it. [laughs]

Tobias: That’s why you get paid.

Jake: Yeah, that is why you get paid.

Never-Sell Done Right

Tobias: My topic today is, I’m going to talk about that a little bit– There’s been a few tweets and papers around recently that show that if you had just held the top names in the S&P 500 and not reconstituted the index, you just hold them and you don’t sell, it seems that you’ve done better-

Jake: Really?

Tobias: -over time than following the index. Yeah. And possibly at lower risk too.

Jake: I got to hear the methodology behind this before I guess I could–

Tobias: One is a Jeremy Siegel article, and then I just saw a tweet that talked about the experience over the last 10 years. But then there’s also, on top of that, Sleepwell had a nice article today about the– I’m going to forget which one it is now, Ted or Todd. Todd, I think. When he wound up his partnership in 2011 to join Berkshire, he just said, “Hold these names.” [crosstalk]

Jake: That’s how [crosstalk] Ted move.

Tobias: I like that idea of– [crosstalk]

Jake: Tad?


Tobias: Yeah, I’m just going to say that. You just go backwards and figure out who it is. I think there’s something to be said for that. I know this is a little bit sacrilegious, but I actually think there’s something to be said for never sell, if it’s implemented in the right way. Because I think that when I’ve done those little research projects where I go back and look at, if instead of selling, you just hold it. You end up at the end of the period whatever you are– I’ve looked at it over about the last 25 years.

The things that work are the things that become massive parts of your portfolio. And the things that don’t work basically dwindle to nothing. This is assuming you’re just doing an equal weight by 30 names each rebalance state and you just hold onto them. And you’re rebuying some names over and over again. Some names you buy once, you just never hear from them again. But you end up at the end of this period with this portfolio that looks like this kind of Kelly weighted into all of the most successful, most popular names in the market.

Jake: Yeah. Look at your conviction on holding that giant winner. You’re a genius.

Tobias: There’s no tax consequences.

Bill: If you’re trying to live off that portfolio, I think you want to throw in some stuff. Compound, shoutout to you. I know you’re listening. He was telling me today, some of these mortgage REITs that flip to floating, they’re trading at 10%, 11% dividend yields. You got EPD that will give you 8%. God forbid, you own some cigarette companies that give you 8%. Some of those shipping leases. You need something that’s bringing cash into you to give you the ability to rebalance. I think that’s part of the insurance genius, except that is a better working capital cycle.

Tobias: That’s fair. But the way that I’m selecting these things just say you’re buying on the cheapest free cash flow multiple that you can. So, it’s just like it’s a free cash flow screen. You just buy all the cheapest stuff on a free cash flow screen, not worrying too much about the return on invested capital. Because you’re getting so much cash flow for what you’re paying, over a short period of time, a huge amount of cash flow is returned to you. So, over five years, a third of your portfolio comes back in cash. That’s the average across the many, many portfolios that I form on a rolling basis. So, that is– [crosstalk]

Jake: Does that count stuff that gets bought out, stuff that’s–? [crosstalk]

Tobias: A lot of stuff gets bought out, because competitors are picking off stuff that’s too good. A lot of stuff just returns capital, because it’s got too much cash and it’s cheap relative to– can buy back stock. So, the end of it is that you’re having to redeploy a third of your capital every five years and then that sort of snowballs as well. So, you’re redeploying quite a lot of capital, even though you’re not selling.

Jake: Yeah, natural turnover.

Bill: How do you assume that you’re rebuying, the same amount all the time?

Tobias: No.

Bill: You just start to recycle the capital that you have gotten back, and then are you selling proportionately into buybacks. If they have buybacks, do you assume that’s like return–? [crosstalk]

Tobias: You just holding onto your stock. You’re just holding onto your stock.

Bill: Huh, interesting.

Jake: Just concentrating on the precious.

Tobias: I like it as a strategy. I’m trying to find some way to deploy it into something, but I haven’t got that far yet. I’m still thinking through it. But I just keep an eye out for these articles where people say-

Jake: Sounds a bit like invincible.

Tobias: -not rebalancing, that’s interesting.

Jake: Yeah.

Tobias: Yeah, that would be the idea. Something like that.

Tobias: It sounds like an ETF with the ticker, HODL.

Tobias: Yeah, actually, that’s great. Does that exist?

Bill: It should.

Tobias: ETF, it’s a good one.

Bill: Yeah, people, they would be really [Tobias laughs] surprised if they found out that HODL is not bitcoin.

Tobias: Maybe trail.

Tobias and Jake: Yeah.

Jake: How are you going to write a book around that either? That’s what I’m trying to figure out.

Bill: There’s ways.

Tobias: Yeah. Book’s almost done. Going to get there. I don’t know. Maybe sometime Q3, I think, it’ll be out.

Bill: Wow.

Tobias: We’re two down.

Jake: Don’t threaten me with a good time.

Tobias: [laughs] Oh, don’t want to disappoint everybody. I think I announced it on Billy’s podcast. So, maybe I’ll have to get it done and then jump back on and have a chat.

Bill: Yeah.

Jake: That’s a good idea.

Bill: I hope that I can be part of your author tour.


Bill: The thing that’s tough about the Stellantis first race thing or Ferrari is like, man, you had a much bigger drawdown going into– So, knowing when to flip that bet is tough. Timing, I don’t know. The timing factor thing is tough. But you say that value should work anytime. It should be now, right? They say the spread is wide.

Tobias: The spread is wide and it’s an early cycle strategy for the most part, because for the reason that Jake was pointing out before that, it’s often– There’s this myth that it avoids the drawdown, but I don’t think that’s what happens. It seems to draw down first and recover first. So, if you’re looking on an annual basis, it looks like value’s had a good year when the index has had a bad year. But that’s not actually the case. If you’re just looking at it– [crosstalk]

Jake: You got killed the year before. No one’s caring to touch it.

Tobias: You probably bottom at the same time. And value bottomed at the same time as the rest of the index did in 2009. It just that didn’t happen in 2000, because it had that long period of underperformance, but it was still volatile as hell. You couldn’t have done it levered through that period.

Bill: Wild. How much quality has bounced since, what, October?

Tobias: Are you looking at the index? What are you looking at?

Bill: I’m looking at Stellantis versus Ferrari. But I think it’s probably relatively–

Jake: It’s true of a bunch of crowded names.

Bill: Yeah, I think it would not –.

Jake: [crosstalk] out before a recession and quality.

Bill: Yeah. Well, Ferrari has got that luxury element to it too, right? As long as the wealthy compound faster than the amount of cars, pricing should go up.

Tobias: How you guys feeling about this market? I’ve seen a few other tweets there about where– Ark topped out February, two years ago, February 2021, and then the market topped out last year. So, we’re now 16 and a half, coming up on 17 months into this thing, I saw something– It was one of the technical guys at this– We’ve been in a channel since June last year or something like that, but we’re clearly well below where were at the peak.

Bill: The old channel.

Jake: It’s been a boring channel.

Tobias: Yeah, change the channel.

Jake: PBS or something. [laughs]

Bill: I prefer this channel to the channel that was playing a year and a half to half a year ago. Yeah, this channel is a little more– [crosstalk]

Tobias: What’s half a year? Was that October?

Jake: My guess, it pays ripping– [crosstalk]

Bill: [crosstalk] Yeah.

Tobias: We inverted October 25. And so, the earliest period– I know everybody loves it when I talk the inversions.

Jake: [laughs]

Tobias: The earliest period is like a week. Not to put too fine a point on it, but April 25 is six months.

Jake: No.

Tobias: And then, October 25 is the average, and January 25 at the outset– January 25, 2024.

Jake: Is the inverted yield curve in the room with us? [laughs]

Tobias: I’m going to have Cam Harvey here next week.

Jake: Ah, I’ll save that joke for next week.

Tobias: We’ll get on the couch and talk about it next week.

Jake: Yeah.

Bill: Yeah, it will be in the room with you.

Jake: Whoa.

Ray Dalio’s – Changing World Order

Bill: I don’t know. Man, I’ve been reading or listening to Dalio’s book about The Changing World Order.

Tobias: is this– [crosstalk]

Bill: It freaks me out. Mostly because I think he’s probably right and I don’t love the idea. I think he would say the US is in the early decline phase.

Tobias: Well, it’s hard to know. It could be the end of the republic and the beginning of the empire, if we follow Rome. The best days of the Roman Empire were, when it was empire rather than when it was a republic. Marcus Aurelius is 250 AD.

Jake: Best days or is that just the ones that we wrote history books about?

Tobias: 250 AD, I think, is widely regarded as being the pinnacle, because you’ve got the great Roman stoic emperor, Marcus Aurelius, running the show. But then, he hands it off to his adopted son, Commodus, and it goes downhill. Everybody’s seen Gladiator, everybody knows what happens.

Jake: Yeah. That’s where you get the term “commode” into the commode. Is that right?

Tobias: [laughs] I don’t know how it works.

Jake: Oh, I thought it was Commodus. That’s what they said in the movie.

Tobias: Oh, dude, I don’t know. I’ve got an accent. I’m allowed to say whoever– [crosstalk]

Jake: Yeah, you’re allowed to just mispronounce anything. [laughs]

Bill: Use your facts.

Tobias: I caught up with Jake and some friends of ours a few weeks ago and they were giving me– Because I say advertisement, like advertisement rather– [crosstalk]

Bill: No, it’s an advertisement.

Tobias: Advertisement? Negative.

Bill: Yeah. Are you a US citizen?

Tobias: I’m also an Australian citizen. But sometimes, I like to pronounce it– [crosstalk]

Bill: Yeah, we should take your US card if you call it an advertisement. Forget that.

Tobias: I like to pronounce it in French fashion, advertisement.

Bill: Oh, gross.

Jake: It does sound kind of nice.

Tobias: Yeah.

Diet Pills & Junk Food

Bill: How I feel about the market bringing it back to that–

Jake: Yeah.

Bill: I think there are probably opportunities in small. I think there are probably opportunities in the value bucket. Look, I don’t know what the hell I’m talking about here, but compound is a smart dude. I think these variable mortgage REITs probably have some opportunities that make sense. So, I think there’s opportunity. The broad market as defined by whatever the S&P, yeah, I don’t know.

Jake: [laughs] Broad market is just Tesla, Apple, Google, Amazon.

Bill: Well, even quality. Look, I get why people own– I saw a tweet that said like, “Oh, McDonald’s is at 37 times earnings. This is going to end well,” or something like that. I don’t know that I buy that.

Tobias: McDonald’s margins are up considerably too over the– [crosstalk]

Bill: It wins in a lot of scenarios.

Jake: Robots.

Bill: Probably going to give you a real return. If it’s only a two and a half percent real return, is that a lot? No, it’s not, but it’s probably real. That may better than a lot of businesses out there. So, I can understand why people are paying up, but I don’t think you’re going to get rich owning it, let’s put it that way, and you may lose wealth, but I don’t think you’ll end up in the poor house either, which is half the goal.

Jake: Yeah, that’s a good point. Don’t give it all back.

Tobias: Yeah, I don’t think it’s a donut, either. Big call there. Big call.

Jake: [laughs] Yeah. Never been against the American eater.

Bill: Yeah. Or, like coke, right? I think Coke is the same thing. I have thought it for a while. I remember the tweets, “Why is Coke trading where Google is?” Well, Coke isn’t getting attacked by Microsoft and the potential threat of AI. And you know that people are going to be fat next year. And now, you got the pills that you cannot be fat anymore. [crosstalk] Coke without– Yeah.

Jake: Diet Coke.

Bill: Yeah, that’s straight.

Jake: Why would I ever drink Diet Coke?

Bill: Diet Coke. My diet is the pill and then I drink the Coke. Who knows? Maybe that’s a growth engine.

Tobias: That pill is not amphetamines. The diet pills used to be like– it’s just basically some sort of speed. You just hopped up on speed all day long, and that’s how you lose weight. You just sweat it out. Jiggle it out.

Bill: Yeah, that’s right.

Tobias: What’s the mechanism that these diet pills? How do these diet pills actually work? In the 1800s, it was a tapeworm. Tapeworm and speed. So, we’ve decided that a tapeworm and speed aren’t good for you, but we’ve found some other way of making people lose weight with a pill that is good for you?

Jake: Oh, bloodletting, actually.

Tobias: Bloodletting. Yeah, just take a leg off.

Jake: 38.

Tobias: That’s blood there.


Bill: What I’ve heard is that it helps your metabolism optimize.

Jake: That’s– [crosstalk]

Bill: Yeah, right.

Jake: Bullshit.

Tobias: Optimization.

Bill: I’m with you. Yeah.

Tobias: Yeah, optimization.

Bill: It turns out you have a stroke at 55, but you’re skinny while it happens.

Jake: Have you seen that chart that shows– It’s like the most convoluted arrows and like a million things pointing around, and it’s just describing the most basic cellular processes. So, to imagine that you could go in there and monkey around with any of those and not just completely F something up is just– It really is the ultimate in a fatal conceit.

Bill: With that chart, were you talking about Sequoia talking about how they missed FRC or was that something else?

Jake: [laughs] Oops.

Tobias: Ooh. I’m not throwing shade. You all are smarter than me, but I did avoid that bloodbath. So, that was nice.

The Downside Of Social Media

Tobias: To what extent was that the fault of SVB or the guys who are– There are plenty of banks have gotten– [crosstalk]

Bill: You’re really going to get me on this?

Jake: Yeah, let’s go. Maybe go all in on something here, Bill, if you want.

Bill: My heart started to race when you started to ask the question.

Jake: [laughs]

Bill: The behavior on social media was absolutely despicable that weekend.

Tobias: What happened?

Bill: I will not tweet things about bank runs. I have a tiny little account that no one pays attention to in the grand scheme of things. These motherfuckers are out here talking about, “The next bank is FRC and everything’s going down and we need to–” Bill Ackman’s out here crying on Spaces. I don’t even know that he was wrong, but he does like bailouts when they benefit him. I like how he always is like, “Well, it’s because I’m long in the US.” Yeah, Bill, you also get 2 in 20, but whatever. I don’t know. That whole thing really bothered me. Ackman less so– [crosstalk]

Jake: Well, their hero– [crosstalk]

Bill: I defend him a lot. So, [crosstalk] wrong.

Jake: The part that I couldn’t handle was pretending like you were a God damn hero because you were saying, you yelled fire to save everybody.

Bill: People should thank me.

Jake: Yeah, exactly.

Bill: Blocked all of them that weekend. They can all go fuck themselves collectively. There’s just something so wrong about– I guess, during the weekend, I said we should let it burn, and a couple of people popped in, and they were like, “You’re not really thinking.” [Jake laughs] And I said, “All right, I guess, you’re right that we shouldn’t let it burn–” [crosstalk]

Jake: Smolder. I don’t know what’s the– [laughs]

Bill: You would think some of these VCs would say to some of their companies like, “Maybe we shouldn’t have all the money parked in this one bank.”

Jake: Yeah, but then you see a video of one of them– I’m not going to name names, because I’m trying to stay class– [crosstalk]

Bill: Yeah, it’s because they’re all bribed with freaking below interest loan.

Jake: Yeah. Well, I got this 50-year mortgage from this place. I love these guys.

Bill: What else would you like Mr. Whatever and what else–? [crosstalk]

Jake: Dude, come on. This is– [crosstalk]

Bill: I’m talking about how they basically brought the fluffers out to close his mortgage.

Jake: Yeah. We had eight guys out here.

Bill: Yeah. Oh, God, the worst people, those four.

Jake: [laughs]

Bill: Oh, well, yeah, whatever. The genius, Chamath, discovered the perils of margin loans, apparently.

Jake: Yeah.

Bill: Who would have thought it wasn’t free money without risk? I don’t know, I don’t get it. Sometimes, I wonder about the world we live in.

Jake: Mm. You know what though? Just to tie this all back into the Roman Empire, got to remember what Charlie told us, that there’s still a lot of joy to be found in a decaying empire.

Bill: I do think the good news is we found the key to the weight loss.

Jake: [laughs] It sets– [crosstalk]

Bill: For me, I’m just going to have– [crosstalk]

Jake: We’re hope free.

Bill: Yes, questions in my ear about what I think about VCs and Silicon Valley Bank and how they behaved. And then, my heart rate goes fast enough that I just start shedding via sweat. I get physically angry when I talk about this stuff.

Jake: As you should. Like you said, it’s despicable.

Bill: Right.

Jake: That’s the right word.

Bill: Look, obviously, I got friends that were long FRC, and people miss things on that bank and whatever, but I think with First Republic, what woke me up Saturday, I went to my grandma’s community, and I was sitting next to two guys who definitely had over the insured limit of deposits. They were commenting on how much they were leaving on the table by not owning Treasuries and they were like, “Why are we getting paid nothing to take any risk when we could be getting Treasuries and actually be risk free?”

Jake: The math’s very simple there.

Future Not Bright For Commercial Office Space

Bill: Yeah, I think that’s more of what happened. It seems like the market’s over it, but I’m curious to see what happens to these banks as NIM compression starts to roll through and what that does to credit economy broadly.

Tobias: Yeah, I don’t know. The banking thing is over. I think the banking thing is just quiet.

Bill: Yeah.

Tobias: It’s just the solvency issue. The liquidity issue catalyzed the solvency issue, but the solvency issue remains, to the extent, they’re trying to recapitalize themselves by not paying any interest, and then clipping it out on the other side, but I don’t think it’s going to work. The main problem, I think, is the commercial. Commercial office space, just disaster.

Bill: Yeah. Those loans, I think, they’ll just be re-termed out. I don’t mean that extend and pretend. Your economics are going to be worse than when you underwrote them. But I don’t know that it’s going to be some massive default cycle or anything.

Tobias: Well, I think there’s a massive default cycle coming, for sure.

Bill: Yeah. No– [crosstalk]

Tobias: There’s two issues. There’s, do you raise money now because you need the money? Or, do you wait and then get downgraded? Those are basically your two choices. If you get downgraded, then the cost of raising capital is going to be much, much higher.

Jake: Are you talking about for a bank?

Tobias: For the banks, yeah. [crosstalk]

Jake: As soon as you try to raise money, that’s the signal like, “Uh-oh, something’s broken here.”

Bill: I think you actually buy the stocks, because they sell off, and then they can start to go up again.

Tobias: I don’t know.

Bill: I’ve been looking at discretionaries. Well, you buy the stocks when financial specialists tell you to, not when I tell you to, but you shouldn’t listen to the thing I say. But I was looking at discretionaries, and somebody smarter than me said, because I have this obsession with Camping World, he said you buy it when they cut the dividend, that’s the right time to buy it. I wonder if consumer discretionary items like that, if Camping World cuts the dividend, I wonder if they all start to go up at that time.

Jake: That’s like a capital cycle theory in a way there. Like, there’s not enough money within this industry to pay the owners. So, we’re cutting the dividend. Therefore, there’s unlikely expansion within that industry of other Capex and whatever as much as during the boom times. And so, you’re likely to have a sense of where you are in that capital cycle, potentially?

Bill: Yeah, you’re not doing it when times are great. That said, I don’t understand why anyone would want an RV that hasn’t already bought one. So, I don’t [crosstalk] stocks.

Tobias: Because the secondary market for RVs is pretty good at the moment?

Bill: Yeah, boats too, man. Boats are crazy.

Tobias: I think a lot of people bought a lot of stuff in–

Bill: No, it’s crazy strong. I don’t know what the hell is going on.

Jake: Tell me when it gets cheap, then I might buy a boat.

Bill: Correct. The answer may be never, but then I’m never going to have one. So, that’s fine.

Jake: [laughs]

Simple Rules – Intelligent Behavior/Complex Rules – Dumb Behavior

Tobias: JT, you want to give us your veggies?

Jake: Yes.

Tobias: Welcome Bill back?

Jake: Let’s do it.

Bill: I had a lot of pork last night. So, I’m ready for these.

Jake: [laughs] Oh, I don’t think that’s how it works.

Bill: Well, it’s got to be.

Jake: All right. You guys know who Chuck Jones is of Looney Tunes fame?

Tobias: No.

Jake: I know Looney Tunes.

Jake: So, one of the OG creators, artists. He, one of his books, wrote about these nine simple but strict rules for Road Runner and the Coyote. Guys, I’m sure enough of you are familiar with the Road Runner and Coyote cartoons that– When I read you these rules, you’ll be like, “Oh, yeah, that seems to jive.”

All right. Rule number one, the Road Runner cannot harm the Coyote except by going beep, beep. Rule number two, no outside force can harm the Coyote. Only his own ineptitude or the failure of the Acme products. Number three, the Coyote could stop any time if he were not a fanatic. And then, it says, “Repeat, a fanatic is one who redoubles his effort when he has forgotten his aim.” And that was a quote by George Santayana, I think. Rule number four, no dialogue ever except beep, beep. Rule number five, the Road Runner must stay on the road. Otherwise, logically, he would not be called Road Runner. Rule number six, all action must be confined to the natural environment of the two characters, the Southwest American desert. Rule number seven, all materials, tools, weapons, or mechanical conveniences must be obtained from the Acme Corporation. Rule number eight, whenever possible, make gravity the Coyote’s greatest enemy. And rule number nine, the Coyote is always more humiliated than harmed by his failures.

Okay. So, here we have these nine rules. When put together, you can very easily see like, “Wow, that explains every single episode of Road Runner and Coyote.” They use these constraints. All right. Let’s– [crosstalk]

Bill: Why Acme? Do you know?

Jake: I don’t know. Is that just like generic–

Tobias: Generic [crosstalk] pinnacle, but there are Acme products around– [crosstalk]

Bill: Yeah, Buffett owns the bricks, right?

Jake: Yeah, I don’t know which came first, but I’m sure someone got sued.

Bill: Sorry. Continue. I like this. This is good.

Jake: All right. So, shift gears. This guy named Dee Hock, born 1929, passed away last year. 1968, he’s a vice president at a local bank in Seattle, kind of a nobody, effectively. And the bank was franchised by Bank of America to issue its credit card brand, which was called BankAmericard. Now, through a series of happy accidents, Hock helped invent a network of competing cards between, and he also became the CEO of a company that was owned by its member banks. Okay. That company changed its name from National Bank America in 1976, and it became, what you might have heard of today, this almost $500 billion market cap company called Visa. So, this is where the founding of Visa came from.

Hock built originally a very deliberately decentralized organization. And he coined this term called chaordic, which is a portmanteau of chaos and order together. What he preached was that simple rules allowed for emergent behavior. He has this great quote. It’s actually one of my all-time favorites. “Simple, clear, purpose and principles give rise to complex, intelligent behavior. Complex rules and regulations give rise to simple, stupid behavior.” He credited the worldwide success of Visa with its chaotic structure that he invented, basically. It was owned by its member banks, which both competed with each other for customers and also cooperated by honoring one another’s transactions across borders and currencies.

Similar to the Road Runner and Coyote, there was this set of principles that were very simple and followed exactly, but it allowed this emergent behavior that was actually very complex. I think, Toby, when I think about the things that you work on in the investment space, I think that you’re similarly trying to follow simple rules that allow-

Tobias: I’ve been taking that too.

Jake: -an emergent behavior that is hopefully complex, and nuanced, and more creative. I think Berkshire, I think, is similar. It’s got some ground rules that it follows, but otherwise, it’s very decentralized. I would say, Berkshire is a chaotic organization.

Tobias: Yeah, I love that. I think that was great. That’s very interesting. Yeah, I like that approach. Very simple rules. I think you get the chaos in holding. If you hold for long enough, you get the chaos.

Jake: [laughs] Yeah, you’re right.

Bill: I like the idea of the complex rules lead to simple– simple but what?

Jake: Stupid behavior.

Bill: Yeah. It seems to make sense to me.

Jake: Yeah. How many pages is the IRS tax code at this point?

Bill: Yeah, I don’t know. I’ve been thinking about it a lot in Florida, the insurance problem.

Jake: Oh, yeah.

Bill: Somebody told me their parents put a roof on a house that was designed to last 50 years, but it’s 20 years old. The insurance companies have this– This is a simple rule, but I think it’s because of complex rules where they’re like, “Look, if it’s older than 20 years, we’re just not underwriting it.” So now, these people have to either not have insurance or pull the roof off when it’s not even halfway done with its useful life, where now you’re almost penalizing the people that did the right thing for a rule, because other people– I don’t know, it’s one-

Jake: Yeah, you are causing stupid behavior.

Bill: -of these longer things where it’s like now the smart people have to not do smart things because they’re absorbing stupid people risk.

Jake: Yeah.

Tobias: There’s a couple of good comments here. One is from John DeGrummond. “Gravity is to the Coyote as interest rates are to stocks.”

Bill: Yeah, I don’t know. Gravity pulls the Coyote down and stocks- [crosstalk]

Tobias: Eventually.

Jake: As long as you don’t look down, you’re good.

Tobias: As long as you don’t realize, you’re fine.

Bill: Yeah, I kind of like it, but I feel like it’s a little off. But thank you for adding value to the show. You’re doing more than I am.


Tobias: There’s one from Thomas Murr as well. “That’s how artists work as well. Painters restrict themselves to certain rules, materials, etc., actually focuses the creativity.” I like that. I think that’s true. Constraints leading into creativity.

Jake: Yes.

Tobias: Hopefully, not just to get around the constraints. That’s the problem.

Bill: Yeah.

Jake: Well, don’t they say that, basically, all financial innovation has been about figuring out ways to get around existing constraints, like laws and regulations?

Tobias: That’s crypto. That’s certainly not– [crosstalk]

Jake: No, I think it’s more generally true than that. Not just crypto.

Tobias: As a recent example, that’s true. Yeah, I agree with that. But crypto just seems to be a way to get around legacy system. I don’t think the crypto guys would disagree with that characterization either.

Jake: Have you guys read about this new thing that’s called, I think, buy now and then pay later?

Tobias: Is it new–? [crosstalk]

Jake: It’s revolutionizing-

Tobias: [laughs]

Bill: I’ve heard about it.

Jake: -[crosstalk] finance.

Bill: I’ve heard about it. I think there may be credit risk in there, but I don’t know. People tell me there’s not.

Jake: [laughs] Well, there’s computers working on all that stuff. So, it’s fine.

Bill: Yeah, that’s right. We’ll see. A lot of these ideas, like Upstart, the stock hasn’t worked.

Jake: What do they do?

Bill: They’re like computers helping subprime lending would be–

Jake: Sorry, you were breaking up there.

Bill: Yeah. Last I checked, the underlying loan portfolio actually has done pretty well. But I need to get really deep.

Stimmy Still Flowing Through The System

Tobias: The bailouts or whatever they call it, the handouts, bailouts, whatever it was, seems to have given everybody more savings than they’ve had at any point going back as 20 or 30 years.

Jake: The stimmy.

Tobias: The stimmy. Yeah, the stimmy. That doesn’t seem to have been entirely burned off yet. I don’t know how you square that with the credit card balances are up, but it does seem that– I have a chart that shows the– It’s Scotty Jackson sent me the chart showing me that– Do you want to jump in the comments, Scott? [Jake laughs] When does that look like it runs out? I can see he’s in the comments.

Jake: Oh.

Bill: Well, I was looking at Bank of America today and their charge-offs, if you look at them relative– I think I was looking at all the businesses, but the one I’m thinking of is the consumer business. They’re still quite a bit below 2019 levels.

Jake: Is that right?

Bill: Yeah.

Jake: Is that same as stimmy still working?

Bill: As a percentage of the portfolio– Yeah. What aggregate spend, I think that they said on the credit cards is up 6%, but total spend was up 9% for consumers.

Jake: Is that just inflation?

Bill: A lot is. Yeah. But I think that’s probably real increases to a certain extent. Yeah, I don’t know. Well, we offloaded it all to the government, right? Maybe that’s slightly too far to say, but we took a lot of private sector problems and put them in the Fed and the government, at least as I understand it. How long can we do that? I don’t know. What does it look like on the other side?

Tobias: Q2 and Q3. Between Q2 and Q3 this year for that to run out or to normalize or turn negative.

Jake: The stimmy passing through the snake?

Tobias: Yeah.

Bill: It’s been a weird, weird time to look at numbers.

Tobias: It’s very strange [crosstalk] wise.

Bill: Ever since 2020.

Jake: Yeah, don’t look at any numbers. That’s the advice. [laughs]

Bill: I don’t know that that’s the advice. But it is hard to figure out, like, what’s the right comp base, and how much is just reverting back to the trend, and what can you really extrapolate from here? It’s just very difficult.

Working From Home Has Caused A Secular Change

Tobias: There are clearly some secular changes in there as well. The big one, I think, is just the way people work. Obviously, people want to work from home. I want to work from home too. But the impact on office is that occupancy is 50% of where it was before. That’s just an extraordinary number. There may be some cyclical weakness hidden in that too, but it looks like it’s still growing to me. But the 50% is a secular change. At this stage, I don’t see how it gets back to– It’s not going to double from here. People aren’t going back to five days a week in the office.

Bill: No.

Jake: Mo.

Tobias: That means that leases won’t get paid, that means that the people who own that building can’t make their debt payments. That has a knock-on effect at some point.

Bill: Yeah.

Jake: They got to double the population.

Tobias: Yeah.

Jake: Not [crosstalk] time.

Tobias: I don’t think Elon can have that much sex.

Jake: [laughs]

Tobias: That’s right. It’s okay to be Musks.

Bill: Yeah. This is all Musks and idiots. The only addendum to Idiocracy should be it should have been a bunch of little Musks running around there too.

Jake: Oh, number two.

Tobias: It’s a great movie.

Jake: Yeah. I need to rewatch that.

Bill: Yeah.

Tobias: [crosstalk]

Jake: Does it make you cry though, because it’s just too real?

Bill: A little bit. Yeah, it’s wild that SL Green right is below the COVID lows. That’s office trust or REIT.

Jake: That’s more like SL Red.

Bill: [laughs] I actually like that a lot. Nicely done, sir. Boston properties, I think, is too. Those are two that, in March 2020, I would have been like, “These things are slam dunks to come back.”

Jake: Buy on fear.

Bill: Buy on fear, but not sell.

Tesla Sales Rose In The First Quarter

Tobias: I saw a note today. This is this was just a tweet. It wasn’t attached to any news, so I don’t know if it’s true or not. But it said that Tesla sold 40% more cars over the last 12 months than it did in the preceding 12 months. Is that right? That’s extraordinary growth, if– [crosstalk]

Bill: That sounds right.

Tobias: How cranking.

Bill: Yeah.

Jake: Fair play.

Tobias: Yeah.

Bill: If you trust the financials, the financials are pretty impressive too.

Tobias: Samson’s in there. Samson can let me know.

Jake: Yeah.

Tobias: What else is going on? This is a quiet market. What do they say? Never short a quiet market, right?

Bill: I don’t know.

Jake: Is that what they say?

Tobias: That’s what they say. Who are they? People trying to short a quiet market.

Jake: Yeah, they don’t work here anymore.


Bill: Yeah, I don’t know. Like I said, I just think small makes sense. There’s been too much underperformance for too long in some areas, I think, coming out of this. But I’ve talked to a lot of guys that were around in 2008, and they said that they made the bets early and then they got the shit kicked out of them, and you got to wait till you’re on the other side. If I figure out how to wait till I’m on the other side and still make money, I’ll let you guys know.

Jake: Yeah.

Tobias: Moving average or something like that?

Bill: Yeah.

Tobias: We’ve been talked about– [crosstalk]

Bill: Probably around the other side, but I could totally see you that we’re not.

Tobias: I don’t think we’ve seen a flush yet. Unless you say October was a flush, but that was a very mild selloff, I think, in terms of what we’ve seen historically.

Bill: Yeah. Look, in thoughts, that make me no money at all. I agree with you.

Tobias: Yeah, that’s true. It’s not very helpful, but it is– [crosstalk]

Jake: It’s provocative.

Tobias: Yeah, it’s provocative. That’s right.

Jake: [laughs]

Warren Buffett’s Japan Carry Trade

Tobias: We haven’t talked about Buffett buying– Was it 2017? He’s bought five of the Japanese trading companies that are– They all have thousands of subsidiaries. Do you think that he’s done the same level of diligence that he’s done? Do you need to? Is it like buying a basket and then he’s cauterized it with Japanese yen, borrowing in Japanese yen, so he’s got this gigantic carry trade going on? The dividends are already up 70% on those positions. That’s not bad for the old fella.

Bill: Nice. Smart guy. I don’t know. [crosstalk]

Jake: He sticks with it, he might-

Tobias: Make something of himself.

Jake: -might make something of himself. Might be pretty good at this.

Bill: Yeah.

Jake: Yeah. Well, just [crosstalk] legendary.

Bill: I didn’t actually watch him– [crosstalk]

Jake: No, it’s good. I find the psychology part interesting of how he interacts with management in this situation.

Tobias: Yeah.

Jake: So, he bought 5% and then he wrote them a letter, as one would, and said, “We won’t go over 9.9% without your blessing.” So, there’s an implicit– And then, of course, they welcomed him in, and then he went and talked to him, and he’s bought more. I think they’re in that way similar to– He’s able to hold people to doing things that he wants them to do by praising them in that direction. I think there’s something really smart-

Tobias: It’s clever.

Jake: -and important to think about that. I don’t know if that applies to your children or where else you can use that in life, but I think there’s something intelligent in that we could all learn from.

Tobias: Yeah, I agree. You had a few good bullet points out of the conversation you had with Becky. Can you run through those quickly? Do you know them off the top of your head?

Jake: Uh, maybe.

Tobias: He’s brought, John DeGrummond says, 7.4% of 5 trading houses. And the leverage the yen. And so, he’s borrowing at 0.5% in yen terms. He’s getting dividended up more than that, and the dividends are up considerably over the period of time.

Bill: I think the math works on that.

Tobias: Yeah.

Jake: Oh, that’s the other thing is, while he was over there chatting with them, he mentions, “If you’re open to incremental investment and you have deals, give us a call and we might be able to help out. We’ll pick up on the first ring and let you know within five minutes.”

Tobias: And we have an unlimited balance sheet.

Jake: Yeah. And so, think about that. He says he was surprised to be able to buy into these companies at a 14% earnings yield, which is like 7 PE, if my math checks out-

Tobias: Always checks out.

Jake: -with a growing dividend. And then, imagine basically saying, “Hey, if you want to do any M&A in this cheap environment, boy, that might be a good use of capital and we can give you more if you need it,” in a way, breaking the ossification that characterized Japan, Inc., over the last 30 years. He might be helping to chip away at that, actually, through capital allocation and the encouragement of the right moves within capital allocation. So, I wouldn’t be surprised if 20 years from now, this is setting in motion a ball that actually is a renaissance of Japan, Inc., in a good way for them, for everyone, really, and that if Berkshire doesn’t come out smelling like a rose on the whole thing.

Tobias: What do you make of him actually flying over where he didn’t need to do that when he bought the positions, and he wrote them a letter? So, two questions. What do you make of him flying over? And then why a letter versus a call? Do you think a letter, it’s more black and white and written down, like, we can hold you to it now or hold it itself to it?

Jake: It’s a very respect-based culture, as well. I think showing up is a– [crosstalk]

Tobias: But didn’t he buy them in 2017?

Jake: [crosstalk] gesture.

Tobias: We’re here in 2023.

Bill: He’s an old school cat though. I think he likes letters. I was told to handwrite him a letter when I wrote him. And it worked. Then, I don’t know where the letter that I got back is. But I have a picture of it, so I got that going for me.

Jake: Yeah. [laughs]

Bill: I think I’ll find it. I think it’s in some book.

Jake: Fair enough.

Bill: Too many moves, man. Too many moves.

Tobias: So, what’s interesting?

Buffett: Paramount – “It Isn’t Fundamentally That Good A Business”

Jake: Do we have time for some Q&A since we have-

Tobias: Yeah, for sure.

Jake: -we got Billy in the house? I know the fans want to know what’s on his mind.

Tobias: “How much of BRK portfolio is in Foreign stocks??”

Bill: No, I don’t know. Look it up. I don’t know if you can’t do that off the top of my head.

Jake: Well, they don’t have to report, so it’s hard.

Bill: Yeah, and he doesn’t name them, right? He named Paramount as one of these businesses that like– [crosstalk]

Jake: Yeah. What do you think is going on there?

Bill: -in last letter. I think he thinks they’re going to throw in the towel on streaming. That’s what I think. It was weird how he was talking about it. I think the older man brain let out a little bit more than the younger him maybe would have. I think he thinks that they can be a good arms dealer business. They’re signing up all these subscribers at crappy rates, and then Becky said, “Well, you told me all the reasons not to buy it.” And he said, “Well, we’ll see what happens.” I think what he’s saying is, “We’re going to get closer back to the way the world is,” or maybe second way out as they get bought out.

Tobias: I got a good question. “Are you going to have another gathering at BRK23?” Yeah, I think we will.

Jake: Yeah. Should we do it at that second floor of the Hilton, take that spot over again?

Tobias: That does seems to work pretty well.

Jake: It worked out pretty well.

Bill: Subspace that requires no planning, and we’re good at that.

Jake: Yeah, exactly.

Bill: I like that bar.

Tobias: “Is PARA a Buffett pick or a Ted pick?”

Bill: It was a Buffett pick.

Tobias: Yeah, I got a good one here.

Jake: It’s– [crosstalk]

Tobias: I have heard that it was a Buffett pick. I’ve heard that he called directly Shari and said, “I will be a good shareholder.” But– [crosstalk]

LVMH – Still A Great Business

Tobias: “What do you think about LVMH, limits to growth, run by the richest man in the world?” Good insight to be buying luxury. It seems to be pretty recession resistant. Small luxuries?

Bill: Yeah, it’s the greatest company in the world, other than maybe Hermes. I don’t know. It depends if you want to buy that kind of an idea. It’s not cheap. I don’t think it’s undiscovered. Fantastic business.

Jake: Tell me something that everyone doesn’t already know about it.

Bill: Yeah, but they push price farther than I ever imagined that they could, and they’ll probably continue to. I think we live in a world of prosperity, it probably does fine. If we don’t live in a world of prosperity, I don’t know where you’re going to hide.

Jake: A lot of the job to be done of that is signaling, and you want to show how successful you’ve been by wearing these brands. But if you do have a world where things go back a little bit more, where it’s like, “You need to be a little bit careful about showing off your wealth because the natives are restless. There’s not enough food in the bellies. Maybe you don’t want to be parading around in your super expensive stuff there, because they might just get a little angry at you.”

Tobias: Guillotines.

Jake: The guillotine risk.

Tobias: Guillotine risk.

Jake: Yeah, exactly.

Bill: Yeah, I don’t like the idea of that world existing.

Jake: You don’t think it will or you don’t want to live in that world?

Bill: No, I don’t want to live in it.

Jake: With that shirt?

Bill: This shirt will scare everyone. I will sic the- [crosstalk]

Tobias: That’s Florida Man.

Bill: -on the shirt on the people.

Jake: Florida Man.

Bill: Yeah, look, I think that could be a risk.

Tobias: What was the running period for the Zoom-Qurate bet? Is that resolved?

Bill: Oh, it’s over.

Jake: It’s over?

Bill: Qurate lost.

Jake: Oh, I thought you had it in the bag. I mean, Zoom just cratered coming out of it.

Bill: Of course, so did I.

Jake: How bad was the final result?

Bill: It was really bad. I think Qurate was down 86% and Zoom was down 78%.

Jake: Whoa.

Tobias: That percent is, it’s not– [crosstalk] [laughs]

Jake: There’s no winners here.

Bill: No, there was not.

Jake: Scorched earth here. Wow.

Bill: Not great, Bob.

Tobias: Was that including all of the bits and pieces you got out of Qurate?

Bill: Yeah, unfortunately, it was.

Jake: [laughs] Yeah, that included dividends.

Bill: Dude, even the preferred is down.

Jake: Preferred is down big time.

Bill: Yeah.

Jake: That’s wild.

Bill: That’s not great. Look, the cash– [crosstalk]

Jake: When you guys made that bet, did you feel like you guys were both going to be making money when you made this bet?

Bill: I thought that the odds were squarely on my side for a bet like that.

Tobias: Me too.

Jake: I did too.

Bill: I think I would probably make that bet 10 times in a row.

Jake: I think you’d win six of them.

Bill: Yeah. Some things came out that were not great.

Jake: [laughs]

Tobias: What was the period of time that you had for it to run?

Bill: Two and a half years.

Tobias: Oh, yeah.

Jake: Solid IRR. [laughs]

Bill: That’s right. Yeah. It was long enough for a lot of bad to happen to Qurate, but hopefully that bad is closer to over. I still love that business. I like the people there. So, we’ll see.

Jake: But would you own it?

Bill: I don’t. I don’t own any of the capital stack. Sometimes, you can like things and observe from afar.

Jake: True.

Bill: I just continue to go back to my entire thesis rested on habit, and I have not seen evidence that habit has not been broken. If your entire thesis rests one thing and you don’t think that thing exists in the way that it used to, then I’m not sure that talking yourself into, “Well, it’s a lot cheaper today than it was,” is the way to make money.

Jake: That’s true.

Bill: That is kind of intriguing. Kind of intriguing.

Tobias: Do you follow Nvidia at all?

Jake: Preferreds or the–?

Bill: I’d follow things that go up. So, yes. Turns out AI is good for that company.

AI vs The Human Tribe

Tobias: At night, I watch some of the commentary, like CNBC and Bloomberg commentary. They get people on, they give them a little– [crosstalk]

Jake: Why would you do that to yourself?

Tobias: Ah, just to see what people are talking about, see what people are saying.

Jake: Okay.

Tobias: Every single thesis on why the market is going to go up is AI.

Bill: Yeah. AI scares me, man.

Tobias: I’m not scared. I pay for ChatGPT4, and I use it. It’s so mid. It’s just so middle, bruh. I’m not a good enough prompt engineer, but I follow a few guys who are prompt engineers and try to use their prompts. It’s not there yet. I hope it does get there. I think it could be potentially an incredibly powerful thing. But I’m not picking a big stock market run on the back of AI.

Bill: No, I’m not either. I’m more worried about what it’s going to do to us as a society than I am on stock markets.

Tobias: Maybe AI just solves the problem for us.

Jake: It can attend all those bullshit meetings that no one wants to attend?

Bill: Oh, yeah.

Tobias: Just AIs chatting to each other?

Jake: Yeah. [laughs] Having [crosstalk] the meeting.

Bill: You hear how voices are over–

Jake: Yeah, that part’s scary.

Bill: Fake news and stuff is going to explode. I don’t know how you’re going to believe anything you see.

Tobias: That might be a good thing.

Bill: Maybe. I don’t think it is. I don’t think it’s good for common– I do think society having some common ground is a good thing. I think that we are growing more divisive and treating each other less like neighbors, and that doesn’t make me particularly optimistic.

Tobias: But I think that one of the reasons that we do that is we treat what we hear as being true [crosstalk] and it’s not. If you are less trustful of it, then you maybe spend a bit more time paying attention to just outside your window there, which is–

Jake: It is an age-old problem, where– I think it was Mark Twain said that if you don’t read the paper, then you’re uninformed. But if you do read the paper, then you’re misinformed.

Bill: Yeah.

Tobias: Yeah. I thought that was Steven Seagal.

Jake: [laughs]

Tobias: I think it’s funny how many quotes are attributed to Denzel Washington.

Jake: What?

Tobias: Denzel Washington is a modern day– [crosstalk]

Jake: My man.

Tobias: Yeah.

Bill: I guess the issue that I worry about is it seems to me that historically people start to clash. This is not my fault that– [crosstalk]

Tobias: Fourth turning.

Bill: Yeah, I don’t even know what all that means. I know that the book, Divided We Fall, does a good job at breaking– It shows how divided we are now, even down to county lines, that you don’t have purple counties as much as you have red counties and blue counties. I don’t know, I live in a deep red part of the world. I see how a lot of my friends talk about people in deep red places. I come from Chicago, which is really blue, and the people here are a lot like the people there. It’s a shame that they’re not talking to each other, because I think there’s a lot more in common than there is apart. But the amount of vitriol towards the other side concerns me a lot.

Jake: I wonder though, when you don’t have real existential problems to worry about, you focus on small things and fight about smaller things. If you actually had a real risk that was like, “Okay, we’re coming back together as a family here and we’re going to solve this–”

Bill: Yeah, I think we would. I don’t really want to live through that. I don’t know about you. I prefer to stay a family in good times.

Jake: Well, yeah, I don’t think it– [crosstalk]

Bill: Not really the way the world works.

Jake: That’s not how the human tribe works.

Bill: That’s right. Yeah, I think that’s right. Get along Northrop Grumman and Raytheon.

Jake: Yeah.

The News vs The Truth

Bill: There was an interesting paper that came out. I got to read that. I saw the tweets about it, but basically, how these defense contractors– I’m pretty sure it came from the Defense Department, but how they’ve basically outsourced everything and just become like high return, basically, rent seekers. I don’t know if papers that are great coming out of the government, if you’re a shareholder.

Jake: They’re not that high return businesses either.

Bill: I’m just saying you got to read It. I got to read it.

Jake: Read the financial– [crosstalk]

Tobias: Utilities regulated return.

Bill: Yeah. Well, it sounds like some of the politicians are upset. I don’t know. We’ll see. It’s never fun when you’re reading something out of the government that’s shitting on your company.

Jake: No, that’s usually not a good thing. Oh, man, I was going to try to go the whole show without saying this, but–

Tobias: Do it.

Jake: This tweet by Elizabeth Warren about Bezos not paying any taxes in 2007 and 2011 and like, “Oh, happy tax day, Jeff,” ugh, it makes my stomach sick. I’m just so annoyed by it.

Bill: Well, Jake, think about it. What has that man ever done for the United States?

Jake: Yeah. What’s like one and a half million jobs?

Bill: Yeah. How many taxes those people pay? Like, none, right?

Jake: They cherry pick two years– [crosstalk]

Bill: No jobs were created from all the Capex. Nothing. This is a guy you want paying massive taxes. He should be an employee when you really think about it.

Jake: Yeah.

Bill: We’d all better off also.

Jake: Who paid her $175,000 Senate salary?

Bill: Right. Yeah, that tweet was upsetting. It’s upsetting that they sell that kind of a message.

Jake: Exactly. That’s picking at the seams of society in a way that increases guillotine risk for all of us. Those are the kind of things that create class warfare that I find it to be irresponsible. It’s no different than yelling fire with the banks. It’s the same kind of thing.

Tobias: I think cable news channels do that as well.

Bill: Yeah, no doubt.

Tobias: [crosstalk] greater scale. I think that they encourage the politicians because they know that if they can get something provocative– [crosstalk]

Jake: Oh, yeah. Get a sound bite, get us all agitated. Got my blood pressure up.

Tobias: It’s more fairly the for-profit cable news networks than it is the politicians. The politicians, I expect bad behavior out of them. The news organizations, I feel like they should have a little bit more of a fiduciary attitude towards that kind of the news.

Jake: Towards a state type of mentality.

Bill: How do you think they would act if they weren’t public? If you didn’t have this constant need to grow earnings or whatever, would that impact how they act is something I wonder.

Jake: I read a book about The New York Times and all of the things that they’ve reported on over– This is over like a hundred years. The political motivations of it– This was when it was a private company. It was family run at that point. So, I don’t know.

Tobias: [crosstalk] We’ve made it. It’s time, fellas.

Jake: These are hard problems.

Tobias: We’re in dangerous territory here.

Jake: Okay, shut it down.

Bill: All right. Thanks for having me. Love you, guys. Love The Ten.

Tobias: Thanks, Billy.

Bill: I’ll be back at some point. I’m just a little mentally healthier, not on a weekly show. So, I missed you, guys.

Tobias: Likewise.

Jake: Yeah.

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