In their latest episode of the VALUE: After Hours Podcast, Tobias Carlisle, Jake Taylor, and Alex Morris discuss:
- Alex Morris and Buffett & Munger Unscripted
- Warren Buffett’s Investment Evolution
- Buffett’s PetroChina Investment
- Apple: Buffett’s Greatest Trade?
- Capex Strategies in Tech Giants
- Microsoft, Meta, and AI Investments
- Berkshire’s Capital Allocation Philosophy
- Decision Making: Rationality vs. Intuition
- Buffett’s Failures and Lessons from IBM and Kraft Heinz
- Consumer Trends: Alcohol, Branding, and Retail
- The Impact of Changing Media on Consumer Brands
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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Transcript
Tobias: We are live. This is Value: After Hours. I’m Tobias Carlisle, joined as always by my cohost, Jake Taylor. Our special guest today is Alex Morris. He’s the Science of Hitting on Twitter.
Jake: THE Science of Hitting.
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Alex Morris and Buffett & Munger Unscripted
Tobias: He’s got a brand-new book, Buffet and Munger Unscripted. How are you, Alex? Good to see you.
Alex: Doing good. I’m glad the book is– There you go, JT. I’m glad the book is live. I’m glad it’s done. A lot of fun to work on it, but I’m glad I’m done working on it.
Tobias: Tell us a little bit about the book. What is it?
Alex: Yeah, I mean, the simplest way to describe it is for people who have read Larry Cunningham’s The Essays of Warren Buffett, it’s basically that exact same idea for the annual meetings. And the start of it all is when I was getting started in investing, call it the late 2000s, that book was really influential for me and it’s something I even to this day kind of come back to at times for reference. Obviously, it’s a little bit easier now with the letters being online. You can Ctrl+F and things like that a little more, but it’s still something that’s useful for me.
So, when they announced in 2018 that they were releasing all the meetings back to 1994, I didn’t start working on it then, but I think at that point it kind of clicked with me that maybe there was an opportunity to do something like this book. It also probably struck me at the time that was going to be a pretty significant task to actually do that. So, I delayed for a bit, but eventually at some point, got it rolling and then it really got serious after I started working with Harriman House. And at some point, I was like, “Hey, I need to reach out to Berkshire to make sure that this is above board.” I don’t want to get close to the launch date, and then they’re like, “What the hell are you doing? This is our work. You can’t, you can’t release this.” So, got in contact with them and thankfully got the go ahead from Warren. So, then it really kicked into gear.
So, yeah, it’s very similar to that structure covers that the chapters are value investing, capital allocation, accounting, management, chapter on Berkshire, and then some other things like, insurance business, Coca Cola and See’s Candy, auto insurance. Stuff that’ll be, I think, pretty broadly applicable to people who care about investing, but also just business generally.
Jake: I know that some of that source material is a daily consumption for me. It’s almost sacred for me at this point I would say, like not to get too zealot about it. And I always wondered like, “Gosh, someone has to give this the Larry Cunningham treatment at some point.” It’s just sort of like such a good idea and kind of so self-evident. And then, I was quite relieved that when I found out that you were handling it, Alex, because then I knew it was in good hands and it wasn’t going to be done in a kind of jack wagon way. So, I’m very excited for this one. I’m very happy that you put the effort in.
Alex: No, I appreciate that. Yeah, it’s as I kind of say in the introduction, it was difficult to—One, obviously selecting the answers was difficult. And then there’s a lot of answers that are similar to prior answers, maybe not identical, so I had to figure out how to kind of navigate that. And then there’s also the reality of trying to get this somewhere close to being a book that wasn’t 1500 pages or something for obviously printing costs and the cost of the book and just the digestibility of it all trying to make it actually helpful to people. So, as I went through that process, obviously, I did it from the perspective of Warren and Charlie being heroes of mine in terms of investing in business. But honestly, I mean more broadly than that too.
So, it was something that going in I kind of knew– It helped that I have spent a lot of time with the material just like you have. So, I had a sense for what they were saying on a lot of things that may or may not be apparent to someone who hasn’t spent as much time with it. So, I think that may have helped. But yeah, it was definitely a big amount of respect and wanting to treat the source material properly as I was working through this.
Jake: Were you able to get anything pre-1994?
Alex: I was not. I did not find anything. And honestly again, like I think there was just– I had so much by that point that even just adding in– It’s funny that those– And I think it speaks to how the meetings have kind of evolved over time. I looked at one point, there’s a stretch from like 1995 to 2005 that the number of answers that I picked from that part, and don’t quote me on this, but I think it was like three times larger than, call it, the last ten years. And part of that speaks to what they were asked about and obviously, the answers that they gave over time, but I just think there was enough in those early years to really cover the breadth of what I hoped the book would be.
Jake: They also talked a hell of a lot faster back then too. They got more words in per six-hour unit of interview, right?
Alex: Yeah, for sure. And I think there’s a lot of reasons why this change made sense. But when they started doing less of the audience questions and more of the journalist questions, it just– There’s questions about the health impact of Coca Cola. There’s just a bunch of other things that came up that, not that they’re irrelevant, but there’s only so much–
Jake: [crosstalk] feeling of like the owners of Berkshire that have questions about the business and–
Alex: Absolutely. Or even like in the late 1990s, there was a tone of the meeting over a couple years, particular questions that became much more pointed about what they will or not willing to do in investing. And some of the answers that came out of that stuff were very insightful because it kind of put them against the wall a little bit. And those things were– I mean it was just gold, some of those things throughout those years.
Tobias: what was your process? You just sat down with 1994, listened to it all the way through, took out the interesting things?
Alex: Yeah. The first time I went through, my process was pretty bad. I was just like, “I need to start get–” because there’s times just like I just did right there. There’s times where they start answers on things and they’ll go three or four words and then go in another direction. I want to try to keep this as close to exactly what they’re saying as possible, but there’s some times where it doesn’t translate to kind of a written text. So, I started going through it in just like an editing kind of capacity.
And then as I got a couple years in and that took me weeks or months to do, to even get a couple years through, I was just like, “Oh my gosh, I’m an idiot. I’m going to get through all of this, and then I have to go through this whole thing again and actually organize it in some way by topic or answer that is more detailed than like the little description I’m putting in now.” So, I basically just went back and kind of restarted from there with a clear kind of organization system, which at first was still pretty tough. But again, as I got through some of, call it, the mid 2000s and into the 2010s, I had a lot more clarity on what had already been said before on certain topics and whether or not something was going to be added to the book at all. So, that helped a lot.
It also helped to have– I used BamSec for example. On some of the later years, they had the meeting transcript. So, it made it a lot easier to start from something that was a decently high-quality transcript to edit off of. So, some of those things helped. But yeah, when I first got rolling, it was quite inefficient and thankfully after listening to 20 or 25 years, I had a little bit better idea of what I was doing.
Tobias: Going through that process, you were already pretty familiar with the way that they invest having read the letters and various other things. What stood out to you as new ground that you hadn’t heard before made you think about it in a different way?
Jake: Yeah. What are the epiphanies?
Alex: Yeah, it’s so hard to say for what the description you just gave. There’s so much of it that I’ve heard in some capacity I think before. I think details around specific investments, something like PetroChina is a notable one that probably struck me differently than it would have if I heard it ten years prior or something, them detailing that investment. Something like talking about national identity and how they manage the volatility of premiums in that insurance business through the 1980s—
And I mean for people who don’t know, it’s something like $60 million premiums to, call it, $350 million five years later. Then a 15-year runoff back to like $60 million and then another five-year run up to $600 million. And they discuss basically how they had to deal with the incentives in the insurance business, most notably as it relates to the employees to operate the business in a way that they thought made sense and which is evident in the financial results that it was the proper way to run it. But you could imagine for any public company to manage a book of business that way would be incredibly difficult. So, something like that, where I just– I was able to understand it a bit more intelligently than I could have in the past.
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Warren Buffett’s Investment Evolution
Things around Apple are really interesting and Google and Amazon as well, which I had commented on over time, to have it laid out chronologically right next to each other just provides some interesting insight on how the thinking evolves some over time. And it’s just funny to think of something where they pretty explicitly say, “We wouldn’t invest in this, or we certainly wouldn’t have the level of confidence in this that we have in something else that we already own.” And then, fast forward seven years later and it’s nearly a $200 billion position. It’s interesting to think about how that happens. Hopefully, that’s kind of laid out in the book where people can see that thought process evolution.
Tobias: Still the greatest trade ever.
Alex: It’s quite a good one. I mean, PetroChina was a really good one as well.
Tobias: Yeah, I wanted to ask you about PetroChina, actually, because I– What year was PetroChina? Did he make that–?
Alex: I believe JT may know better than I do. I think it was 2003.
Tobias: Okay.
Jake: Yeah. I was going to say like 2002 or 2003.
Alex: Yeah, 2002 or 2003.
Jake: Can you describe the PetroChina deal?
Alex: Yeah, I think the really simplified version is on a metric of like a barrel of oil or something like that, something that they could comp it to Exxon and Chevron and whoever else. It was trading at like a third or a fifth of what those companies were trading at. And the other thing that Warren really notes around that time is that they also made a change in capital allocation in terms of explicitly stating that they were going to pay out, I believe was 50% of I think earnings as a dividend back to shareholders. So, he’s basically– It was at a valuation of $30 billion. I didn’t need to know if it was worth $90 or $110, but I thought it was worth somewhere in that range probably. So, he made the investment around that time.
It’s funny. It came up over the next couple years and one of the prominent times that it came up was Warren said something like, “What I did on that investment didn’t require anything that anybody else couldn’t have done. You just needed to read the filings and see what was going on is kind of just common sense.” And Charlie kind of retorted back to him that, “When you were doing that, I didn’t see anybody else doing that. What you call common sense is I think what an Old Omaha friend of mine used to call uncommon sense.”
And he basically goes into, there’s something really powerful about having a really clear understanding of the universe of ideas that you may potentially be interested in and then really focusing on sifting through that and finding opportunities as they come along. I think that it’s a good example of, in my mind, the most enlightening stuff throughout the book, especially for people who have read Buffett and Munger or have listened to them for a long time, are those examples where Warren says something and then Charlie comes back at him in a way that’s a little bit of– sometimes a little bit of a disagreement with him or saying, “Hey, you’re making this sound easier than it is,” or whatever it may be. And that back and forth is really where not a lot of knowledge comes out at times, in my opinion.
Jake: Yeah, those are my favorites as well. And actually, when Warren kind of redirects and reframes a question and then presents it to Charlie to answer, those are some of the most gold in there.
Alex: Yeah, yeah.
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Buffett’s PetroChina Investment
Tobias: I remember PetroChina being– And I’d been sort of interested in Buffet and Munger for about five years by that point when PetroChina happened. And I remember it being a little bit controversial in the sense that it was very– He had just gone through the 1990s where he’d been buying Coca Cola and had that perform very well and all those sort of famous– Amex and all the quality-compounder businesses. And then all of a sudden, he buys this commodity, Chinese commodity oil and gas driller. And it seemed like kind of a shocking move.
I don’t think I really understood what he was doing until even more recently when he bought Oxy. And I think it’s a similar playbook to Oxy where it’s cheap on a unitary basis, but it’s also got that they’ve decided to completely change their capital allocation, where they’re going to pay out X percentage to the investors, buy back some stock, all that sort of thing. And that seems to be those two things together are what really piqued his interest.
Alex: Yeah, I just pulled this up real quick from page 222. At the 2005 meeting, we put about $400 million into it at a value the market cap was roughly $35 billion. This was in 2005, this is last year, it earned $12 billion. So, we bought it at three times and they had bought it again like I think 24 months prior or something like that. So, it worked pretty well, pretty quick. I don’t know what oil prices did during that time, what impact that had on the outcome, but it worked. Yeah, that one worked pretty quickly. I think it was working–
Jake: Worked even faster than he wanted it to, would be my guess actually.
Tobias: Yeah, I was having that problem with Oxy.
Jake: Yeah.
Alex: Yeah, there you go.
Tobias: It’s kind of a tough– I’ve said a few times that I thought Apple was the greatest trade ever just because for a few criteria. One, he was already very well known. Apple’s very well known. It’s the same as that the debate about whether it’s common or uncommon. Apple’s the biggest, best-known company in the world. Consumer products are ubiquitous. Buffett’s very well known. It’s hard to deploy very large amounts of capital into anything. There are lots of funds around that like they would say at $10 or 20 billion dollars, he’s struggling to deploy the capital and here he is just dropping 40 into one position and then goes onto–
Jake: Whatever, 250 or something insane.
Tobias: And it was after a period of time where return on investment capital had been declining pretty materially for Apple for a period there. But I think when they really turned on the buyback machine, combined with maybe a new cycle for something had just about to come out. I don’t know if it was a new iPhone or something like that, but together it just all sort of mooned. Worked really well together.
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Apple: Buffett’s Greatest Trade?
Alex: Yeah. I think the kicker on top of that too is to your point, it was only a handful of years after IBM, which was I think it was like a $12-billion-dollar investment, if I remember correctly. And it wasn’t a terrible investment in terms of just the pure P&L. Maybe on an opportunity cost basis, it was, but it wasn’t too long after, he had strayed into– I mean again, they’ve never explicitly said this, but he’d strayed into an area that people thought they basically wouldn’t invest in. So, to then turn around and to make the Apple investment is very interesting.
I think the other point you said on capital returns, I think is also another really interesting part of how Warren thinks about what to invest in and where that question of business quality is then impacted by some level of certainty on the combination of price and capital allocation. And that is a hugely important thing. Especially obviously when you don’t control the companies where you having some clarity on that part of the equation can it makes something that’s closer to just a bond basically.
You just have so much more clarity on what the cash flows are going to print out as versus what happens at most public companies where then if it is low quality, you’ve got a real problem on your hands even if you pay a low price and if you’re stuck holding it for long enough. So, I think that part of it shines too as he thinks about what certainty is. There’s kind of these two components of Coca Cola type business quality and then this price and capital returns component of quality.
Jake: And kind of the invert of that they talked about is that it was a thought experiment from Ben Graham that was called like the Frozen Corporation. And the idea was you have this company that is earning whatever amount and it’s a good earning, but it will, by design, by law, by whatever, internally, it will never return any capital to you. So, no dividends, no buybacks ever. What would you pay for that company? And it’s an interesting thought experiment when you look around at most of the companies that have never– And I mean Berkshire’s in this camp, they’ve done some buybacks, a decent amount actually in the last decade, but they’ve never done a dividend except for like 1965 or something when Warren was in the bathroom.
But yeah, to ask yourself, like, if this company were to never return capital to shareholders, what does it really worth? And if you’re going off of that a company is worth, the intrinsic value is the discounted cash flow of whatever it will produce and return to shareholders over its lifetime, which is sort of the structural or the method that everyone is using, really, at the end of the day then you’re kind of playing a greater fool game otherwise, like someone will pay me more for this. It has nothing to do with what it’s actually going to return. It’s will someone pay me more for this ticket that I know will never actually return anything.
Alex: I think even like taking that idea to now, I think it’s a really interesting example that we’re seeing in the mega cap tech space that speaks to this idea of very significant changes in the capex profile, potentially not the wrong decision depending on if you want to play the game. And that’s obviously a very important part of this question, whether or not any given company that space wants to play whatever version of the game there is. But if you do want to play, spending may be a very important requirement and that certainly introduces a different type of risk that obviously also impacts the standing of the business quality overall of that company. Not playing the game could potentially be a very bad decision depending on what the game is and how it all plays out.
So, it makes me think about– It’s just a really timely example of thinking of what change means in an industry or to a business and how he would then probably tie that back to something like what is the capital allocation strategy? What is the distributions back to the owners look like? What is the actual risk here? And it can be pretty extreme when things are changing, which could mean opportunity for somebody who truly capitalizes on it, or it could mean a lot of value destroyed along the way.
Jake: It’s not obvious like, “Oh, don’t invest in the future and only do buybacks,” because then you end up in a Boeing or Sears situation, right?
Alex: Yes.
Jake: That’s not the obvious answer either. It’s not that easy to untangle really.
Tobias: It’s only answerable.
Jake: After the fact.
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Tobias: Yeah, that’s right. Let me give a shoutout and then I kind of want to come back and talk about this tech capex cycle a bit because I think it’s interesting. Bendigo, Victoria first in the house. Must be yeah midnight, banging the] midnight earlier. Max in Valparaiso, what’s up Winter Park. Thanks for joining us, Warren from Winter Park in Florida. Ballynamullan, Ireland. Tomball, Texas. South Wales, Merthyr Tydfil. Cómo están Amigos. Santo Domingo, Dominican Republic. Lewes, Delaware. Boise. Petah Tikva, Israel. Guatemala. London. Belgium. Mendocino. Brandon, Mississippi, San Rafael. Tallahassee. Boston, Oregon City. The Wizard from Waterloo in London. It’s William the Wizard from Waterloo in London. Philly, Toronto, 2 Torontos. Lausanne, Switzerland. Moncton, Canada. Monterey. Blumenau, Brazil. Surbiton, London. Jupiter, Tampa. Longueuil, Quebec, Cincinnati, Vancouver. I think I’ve got them all.
Jake: Wow. Quite a spread.
Tobias: That’s a good– That’s a good shout. Yeah. I want to– The tech companies have– They’ve had this like the– Some four or five out of the Magnificent Seven have been spending giant amounts of money on I think what we initially thought was supposed to be the just like cloud infrastructure, but now it seems to be giant amounts of money on AI chips because AI chips require a lot of compute. And yesterday there was a bit of a stumble in the markets because this Deepseek says that they’ve developed it as a passion project for 6 million bucks. And now today there’s some other stories saying that there’s just no way in the world they’ve done it for 6 million, and it’s probably, a Chinese psyop to tank American tech companies.
Jake: make us not spend, and then they can win the future. Oh, my God. What if.
Tobias: So, we’re right in the middle. We’ve got no idea what’s going on, really. But I do think it’s kind of interesting that the spend was cloud until not that long ago. And then early last year, the spend has all become AI related, but I don’t know that’s been split out, which part is cloud, which part is AI? Whether it’s.
Jake: Who’s stumping for that $500 billion Vision Fund.
Tobias: Stargate.
Jake: AI. Yeah, Stargate now.
Tobias: Doesn’t it already exist? They just aggregated it all together and said that’s one thing now.
Jake: Is that what’s happening? Because I thought this was fresh capital they were trying to release.
Tobias: Is it fresh capital? I think Sam Altman said he can do it for 7 trillion.
Jake: Okay.
Tobias: And I think Masayoshi Son said, think bigger, crazier, crazier, not crazy enough.
Jake: Your eyes aren’t shiny enough right now for the—Yeah, when’s Adam Neumann getting in the AI game? That’s when it’s really legit.
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Capex Strategies in Tech Giants
Tobias: What do you think? What’s all the capex– Is that impression, right, that the capex spend was at one point cloud, and then very recently it’s become AI semiconductor chips. And so that means that Nvidia or Nvidia. Tell me which way it’s pronounced, hive mind, because I’ve been saying Nvidia, but evidently you can say it Nvidia too. What do you think, Alex? You’re a little bit closer to some of the stuff than I’m. What do you think about the capex spend? Has it shifted in its focus?
Alex: Well, this is a roundabout way of answering which may not answer it at all. It’s interesting to go back to as I was just pulling this up a second ago, I think he was on Invest like the best Pat Dorsey, and he was talking about at that point called Facebook, and he said if they spent 14 billion on capex, I think he explicitly said they’d sell the stock. And he said we can’t figure out what they’re going to spend it on.
Jake: Capex for ants.
Tobias: The metaverse.
Alex: subsequently, that number looks kind of low. And at points over the past couple years now, Meta has come out alongside quarterly earnings usually, hey, it’s a decent print on top line and bottom line, oh, by the way, we’re taking up annual capex guidance by another 10% and we’re taking opex guidance up, blah blah, stock gets hit. And it’s funny to think now that fast forward to here in January 2025 and earlier this week Mark Zuckerberg puts posts on Facebook which I don’t even know is this, are you allowed to do this? And being compliant with SEC rules, I guess you can, but he put on Facebook kind of like an updated capex budget for 25, which I think was 60 to 65 billion. And it’s call it $10 billion higher than what people were kind of guessing they’d spend this year.
And the reaction from the stock is slightly higher basically. It’s just the reaction to it is flipped, which in some ways it’s fair because the market responded negatively previously when they’ve stepped up capex investment behind certain things that have since been shown to have improved their ad product and directly improve revenue, almost certainly have a very good ROI. They were worth doing, and Facebook was, or Meta was right to have done them.
To your question now, how is that bucket mixing over time and what’s going where and how many things.
Jake: Sure returns on this?
Alex: Yeah, but how many things are even clearly delineated between different buckets versus being one overall thing? I think that’s at least for someone like myself, a lot less clear than it used to be and it’s a bit of a cop out but it’s honestly how I think about these things is you need to be partnered with people that you trust who are going to navigate this in a way that is to the benefit of the company over the long term. But back to our prior discussion, that’s not always so clear. And I think like a lot of things in business or in strategy don’t do or are decent choices, middle of the road is not a decent choice and it’s easy to get caught in the middle of the road strategy where you just can’t really play the game but you’re trying to and probably burning capital in the interim.
So, me personally, I, I have a lot of confidence in Satya Nadella’s vision at a company like Microsoft, that’s informed by what they’ve done over the past 10 years. It’s informed by what he wrote in his book Hit Refresh, which came out seven years ago now. And I think in a lot of ways, for someone like myself to understand, at least it seems to align with where things have gone or are going. I feel similarly about Mark Zuckerberg and what they’ve accomplished over time on the track record hasn’t been perfect by a long shot, but I think he’s certainly clearly seen for, call it 15 years now or if not more, where things were going in social media and where the opportunities were there such that now-
Tobias: Metaverse.
Alex: – he’s being asked to undo acquisitions that he completed.
Tobias: What about the name change to Meta?
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Microsoft, Meta, and AI Investments
Alex: Yeah, well, Metaverse is a different story. That pipe in the bucket of not yet or not ever maybe, but that’s part of what you get here, I think, and you have to decide whether or not you’re okay with that, and it helps to explain why the stock was down very, very significantly at one point in time. And for someone like myself, I was somewhat comfortable holding, but buying more there is really hard if you’re not sure if the person running the company is willing to go all in. But again, maybe depending on what we’re talking about, it may be the right answer. So, it makes it really, really difficult. I guess we’ll see at the end of all this how it shakes out.
My sense is Microsoft, from everything I’ve heard, at least has a slightly different tact on what role they want to play here and then how they go about monetizing their investments. And to the extent I understand that, I think they have good reason to believe that if they do that part of it well, they will be able to monetize it over time. It might not be there today, but I think they have a good understanding of what role they play in that regard. And then also the OpenAI investment is kind of part of their way of addressing what they don’t want to do I think to some extent. I don’t have great understanding of these things, but generally speaking, I think that’s kind of what’s going on. So, they probably played their hand pretty well so far, but, yeah, the bar keeps rising, it appears.
Tobias: I mean, Meta had a slightly different take to everybody else too, they had the open-source Llama that Zuck said was necessary because he wanted all of the ecosystem built alongside of all the integration into everything else. Whereas I guess Microsoft does that itself. It integrates itself into its own products.
Alex: Yeah, I mean, it’s some of this is outside of the scope of what I could possibly understand, but, yeah, I think Microsoft has– They have a strategic rationale in their relationship with OpenAI that I think gives them certain flexibility in terms of how much they have to chase some of the frontier model type stuff and then they can focus more on, again, things like Copilot and how they can infuse this stuff into365 in a way that can hopefully be additive for enterprises and employees and individuals. And they have a decent track record in terms of monetizing value add in office. So, if they continue to do that, they presumably will be okay over time, but the upfront costs are very significant, it appears.
Tobias: I know that Apple has done some– Apple had some update to my machine over the last week or so that now there’s AI and everything. I haven’t seen any difference. And I know that Google has too, because every time I open an email and try to write an email, it offers to write it for me, but only after I’ve written it. So, I don’t know how helpful that is. More information, give me some more information. I’ll help you write this email. So, by the time I’ve written the email, then it’s hard to help out.
Jake: Yeah. Like a blister showing up after all the work’s done, huh?
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Berkshire’s Capital Allocation Philosophy
Tobias: It’s so different to the way that Berkshire does it, where, the $40 billion went to Apple, some of it goes to buybacks.
Jake: I think more importantly than that, and maybe Alex can talk about this, about how Berkshire has changed over time to sort of evolve with the environment. But this Holdco, where you can redirect capital to wherever is the most promising opportunity and even potentially starve business. I mean, the three businesses that started the whole thing diversified retailing, blue chips. And then-
Tobias: Berkshire’s fine spinning.
Jake: -Yeah, Berkshire’s coats, basically.
Tobias: Coat lining, all died. So, I mean, take it from there, Alex. How’s this all fit together with different business models?
Alex: Again, like I said to the part earlier, I think this is a big part of how Warren thinks about everything. And I have a decent chunk in the book on manager compensation at Berkshire, which you get some detail on in terms of how they think about particularly, well, good business, bad business, the comp structure is adjusted for that. We’re trying to basically single out managerial quality and we can do that in some rough way that makes sense.
And then there’s some base comp that’s presumably tied to something like earnings or some measure that’s directly controlled by the person running the business. But then the kicker on top of all that is the capital charges basically in terms of, if you want to retain capital or even ask for incremental capital from Holdco, that’s fine. There’s a charge against that numbers surely, change to some extent over time, but there’s a very clear charge in terms of how that investment is going to show up and it’s going to directly impact your comp.
And to your point, I think that’s kind of a key part of Berkshire, I think it shows up in certain investments they’ve made over time in terms of if we have enough certainty on duration and our ability to get the cash back. It’s something that we’re willing to do, and you contrast that with a lot of companies where the range of investment opportunities are things that can be done even to the extent that they’re really well understood by the CEO or the board or the C-suite collectively, which certainly doesn’t appear to be true in a number of cases based on the actions that they take. But you have to ask is there really an option for some of these businesses? What are the companies that we’re talking? About what is their ability to not play certain games? Now I just told you that I think Microsoft in some ways is choosing not to play certain games, but to not participate at all. It’s just something that a CEO at a normal public company is not going to be able to basically decide to do.
And again, who knows if it’ll be the right choice depending on the specific instance we’re talking about. But there’s just an inherent flexibility to the way that Berkshire allocates capital that has a ton of advantages. I mean, does it have disadvantages as well? I think is a really fair question. And I wonder if some businesses– Even as you think about a capital charge, well, how do you do that for something that may not have the clearest– At the utility, okay, it’s a 10-year investment, but at least we have an understanding of what that looks like. There are some five-year investments that do not have that clarity on what the input and output will be on given dates or points in time.
And I think there’s probably a fair argument to be made that Berkshire may be at times lacks for investment in situations like that. And maybe partly because the manager is looking at their incentive structure and thinking, “Hey, this actually, this may not be the smartest thing for me to do and Berkshire can go reallocate the capital elsewhere.” So, it’s really messy to measure those things because the three businesses you mentioned no longer existing is something that managed to work out okay for Berkshire and certain businesses today stagnating or going away could also be something that works out okay for Berkshire. It could still be the correct decision. It’s harder for that to be the correct decision when you’re the CEO of public company that is doing that and you decide to pay out significant dividends for years before you go bust. So, the incentives are–
Jake: [crosstalk] are not “pure play” anymore.
Alex: Yeah, I mean, Charlie gives the example of one way that things have changed is I think he specifically talks about France, but he talks about like a retailer where if you could buy it as a cigar butt and get control and shut it down and take all the cash out, it could work out as an investment. But that may have been something you could have done decades ago in certain countries. It’s simply not feasible anymore in a lot of places because the government or the stakeholders involved, but it just won’t be allowed to happen effectively.
Jake: He said it’s not your working capital.
Alex: Right exactly.
Jake: Even if you own the business.
Alex: Right. So, if you’re running GameStop or whatever it may be, shutting it down is not going to happen. Someone’s going to try to figure out a way to make it go. I mean, it might shut down because it goes bankrupt, but shutting it down as a investment strategy is most likely not going to happen. So, you got to be realistic about how these things are going to work in today’s world as opposed to something a couple decades ago.
Tobias: JT, 11:04. You want to– We’re five minutes past the hour.
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Decision Making: Rationality vs. Intuition
Jake: Yes. Let’s feast on veggies. So, as you guys probably know by now, I’m endlessly obsessed with decision making science and today we’re going to dive into this fascinating master’s thesis of this guy, Nicolai Tangen, where he asks in his master’s thesis do good fund managers rely on intuitive decision making? And Alex, please will chime in on this on intuitions that you’ve noticed from going through all of the Berkshire stuff. But first, a little bit about Tangen. He’s not just a regular hedge fund manager. He’s actually now, the CEO of the Norges Bank Investment Management Company, which oversees Norway’s $1.7 trillion sovereign wealth fund. That’s a bit of money. It’s the largest in the world. And put that in perspective, they own about 1.4% of every publicly traded company on the planet. So, no sweat there.
Before this, he founded and ran a hedge fund called AKO Capital. And his background is actually quite eclectic. He trained interrogation with the Norwegian Intelligence Service and then was educated at Wharton. Holds a master’s degree in art history and social psychology from LSE. Actually, a real renaissance man. And now he’s got this podcast too that you can check out that’s pretty good. He’s got a lot of big names on there because he’s a big name.
But back to this master’s thesis, he dives into this kind of classic fund management dilemma that everyone faces like should decisions makers prioritize one rational data driven analysis, hard numbers, spreadsheets, or two, intuitive decision making, which is also called in the research natural decision making, NDM, you’ll see that a lot, which are gut feelings, subconscious pattern recognition and matching split-second insights like aha moments.
Well, to explore this tangent, interviewed 25 different fund managers responsible for billions of AUM each. They weren’t disclosed who they were, but he travels in pretty rarefied air, so I imagine they were pretty good. And his punchline of this research was that it’s not an either or, it’s actually both. And the best fundamentals rely on this hyper rationality and intuition. And of course, he explains that intuition isn’t this mystical thing. It’s a skill that’s honed through experience. And if you’ve lived through multiple cycles and you’ve been analyzing markets forever and the scars can create this mental database that can help you spot patterns even when you might not be able to articulate why. And it’s kind of this muscle memory that you build up but it’s a big but is that the intuition isn’t flawless, and of course Kahneman and Tversky showed us that biases sneak into everything and distort our judgment. But skilled managers actually know this and they actively work to counteract their own biases.
So, one of the most compelling arguments in Tangent’s thesis is that rationality and intuition aren’t opposites, they’re actually complementary. He calls it the art of balancing. And so, the key takeaways from his thesis were, intuition is essential, especially in uncertain situations where data alone falls short. And maybe this has to do with these big capex things, potentially. I mean, what’s the base rates on those things? It’s kind of hard to tell. Experience matters. Years of exposure in markets can sharpen that intuition, but you have to stay balanced. Being aware of your biases is critical. And then maintaining context. The ideal balance kind of depends on the individual and the situation.
And here’s kind of the little funny part that’s a kicker in here that he talks about, is that intuition is often a privilege of the experience. So senior managers, these PMs, they trust their own guts, but they don’t extend that luxury to their junior analysts at all. And it’s very much kind of an intuition for me, not for the dynamic. And to wrap this up in funded management, intuition might be a bit like a fine wine. It gets better with age. But if you’re a junior analyst, your gut is more of like a boxed wine situation and you should probably keep it corked. So, there’s Nicolai Tangent’s master’s thesis from a few years back.
Tobias: How are they measuring intuition?
Jake: There’s nothing in his thesis that has any real numbers to it. He just conducted these 25 interviews and asked managers how they did it, how they think about it, how do they structure their own approach to making decisions? And it wasn’t, there was no real measurement to the whole thing.
Tobias: Like a Phil Tetlock survey interview question, follow up 10 years later, see how it all worked out.
Jake: Well, I mean, that would be– Ideally, that’s what you would be doing was, would be recording these intuitions and feelings and then closing the feedback loop on them on the appropriate timeline, which often can be years to reveal itself. I mean, who knows when these capex decisions today we’ll actually be able to pull out the scorecard and say, “Oh, that was a good one, or that one was dumb, or oh, duh, obviously were all trying to stand on our tippy toes to see the parade better.”
So, as you guys know investing is a very wicked learning environment, meaning that feedback loops are often ambiguous, noisy, intermittent. So, what do you need to do there? Like, you probably really need to be pretty systematic about writing things down and keeping track of it and then following up and doing the work to try to close those feedback loops and figure out when you can and can’t trust your intuition.
Tobias: You have a little Journalytic sign hanging over your shoulder back there.
Jake: It is kind of the whole reason that I made the thing.
Alex: Yeah. It reminds me of one thing Warren’s talked about over time. I can’t remember where it was. I think it was at one of the meetings, but he talked about the idea of going back and reading Coca Cola and reports from whatever, 50 years ago, or in the case of IBM, just saying on CNBC that he decided to buy the stock after having read the annual report for 50 years and having minimal or no activity in the stock over that entire period and he bought it after reading the annual report one Saturday morning and something struck him differently than it kind of had previously.
In the Coke example, I think he explicitly said, “If you’re going to talk about owning something for a long time or potentially owning for something for a long time, it’s useful to know what it’s like to have been to have owned it for a long time.” So, I think there’s a lot to be said for that, it developing over time. And as someone who has been in the junior analyst role of that example earlier, some of my opinions were like that boxed wine, so I could appreciate it from that perspective as well.
Jake: I like when Munger brings up– He calls it “The oddball pastimes of Warren Buffett.” Like, these are the silver trade that Warren put on. They’re these like little kind of oddball things that Warren does and Charlie even points out, like, imagine—He’s like, this is how weird your management is here at Berkshire. This guy’s been sitting watching the silver market for 30 years. Never done anything but recognized this supply, demand, imbalance and then did something like, this is a not duck is basically what he’s saying. Those ones are always funny to me.
Alex: Yeah, they are. I mean, even in that discussion, it’s funny. I think he says something along the lines of, “Warren likes to go do these things. And it’s basically, from my perspective, it’s basically a waste of time.”
Tobias: It’s better than being in the buffer.
Alex: Yes, exactly. That’s fair.
Tobias: Keeps him out of bottles, I think, is what he says.
Jake: Yeah. Hilarious.
Alex: Yeah. Yeah. It’s just funny to think this slightly different. And it gets back to what I was saying before on something like PetroChina, where I think Charlie’s scope of what he was interested in and I always wonder how much of this is– What’s the cause effect between someone who runs concentrated or has that type of, is it an output of that or is it basically an input that then feeds back the other way through? It’s interesting to think about what part of it all is a choice that we make at some point as investors versus something that we kind of optimize for lack of a better term.
Jake: I mean, Charlie did some of that himself as well. He had a story he would read. I think it was maybe Barons for like 50 years. Never done anything with one of the picks and then found some little company that was in there and bought it and I don’t know, whatever 10x this money or something. That would probably fall under the oddball pastimes of Charlie, right?
Alex: Yeah, definitely.
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Buffett’s Failures and Lessons from IBM and Kraft Heinz
Tobias: Is there any discussion about IBM, what he thought it was, what it ended up being? Does he acknowledge. Does he say what the mistake was there?
Alex: There wasn’t a ton that was specific to IBM in terms of what he was specifically betting on or what he thought it would be. I think he did talk about it to some extent in CNBC interviews where I think he hinted at one point that he talked to the people at the NSF and a couple other subsidiaries and got a sense for what IBM does for them. The way that it mostly shows up in the book is in that 2012, I believe, or maybe 2013, time frame where they comp it to something like an Apple or a Google. And they basically say that we have higher degree of confidence than what IBM is going to be over time than we do for these other businesses, again, which is obviously super interesting given how things subsequently played out, but that’s the most prominent way that it showed up in there.
Tobias: What do you think went wrong with IBM?
Alex: I think again to what we said earlier, I think part of the starting thesis may have in some ways been built upon valuation plus capital return certainty. And then the underlying– I owned the stock at some point during that period and also had a similarly bad outcome. I just think at some point the financials of the business certainly were not improving and may have been getting worse. And there was also a ton of non-GAAP accounting that was even getting you to what you thought the actual numbers were and that may have also been goosed a little bit. So, I think it never caught the wave of where the world was going, at least from my read during that time period, particularly in terms of cloud computing and things like that, and it just seems like they lost relevance.
I mean, I think it’s a prominent example of, I guess, the mistakes that a lot of people make, but also Berkshire, right? I mean, Kraft Heinz is very similar. I think there’s portions of the Heinz portfolio that are still quite strong. The problem is they bolted on a much larger business in Kraft that plays in certain categories [crosstalk]
Jake: Paid a lot for it too.
Alex: They paid a lot for it as well. And they play in categories like deli meats and packaged cheese, that just as I look at the world, at least anecdotally, I go to a place like a Costco or if you want to go to the other end of the spectrum like an Aldi and just think about how they’re constantly getting squeezed by private label one end and then like Nichier premium brands on the other end. And a lot of these large consumer packaged good companies have struggled with how to answer that question.
I think I mentioned Brown-Forman earlier. I think alcohol is an interesting one, or spirits is because they have some ability to go up market with either the same brands or by starting extension brands that can rely on probably very similar supply chain, inventory, whatever, like the process is obviously very similar, and it gives some ability for them to price mix the business in a way that they can probably deal with the volume realities. So, I think they can deal with it probably better than most. But Kraft Heinz, I don’t know what I would do if I was running that business. And you told me I was in charge of Oscar Mayer or Kraft American Singles. That’s a tough spot to be in.
Jake: You leave hot dogs in the barrel for longer they don’t start being worth more.
Alex: Yeah, exactly. You can’t age them.
Tobias: I forgot what I was going to ask.
Jake: I’m sure it was blindingly insightful. [laughs]
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Consumer Trends: Alcohol, Branding, and Retail
Tobias: It may not have been [crosstalk]. I saw a chart about the consumption trends of alcohol, which I thought was kind of interesting. I think that wine and beer are down pretty materially over an extended period of time, but spirits didn’t seem to be. Spirit seems to be traveling okay. Although I, I think somebody might have mentioned afterwards if they’d taken the chart back further, then spirits have experienced a pretty significant decline too, but what’s going on there? What’s driving that?
Alex: I mean, like a lot of things, there is some component of pandemic hangover just taking a while to kind of work its way through.
Jake: I see what you did there.
Alex: There you go. There is the mix shift between the different categories in alcohol, like you’re saying. And then there’s also– People are asking whether or not there’s demographic changes underway as well, which I haven’t seen data that was particularly compelling on that front, but I may be wrong as I think I have been to some extent in a business like online dating where it seems the next generation just doesn’t have the interest in using an app like Tinder in particular the way that.
Tobias: What do they do instead?
Alex: Short answer is, I don’t know. I still can’t figure it out.
Jake: Toby’s asking for a friend. [laughter]
Alex: I don’t know what young people do. I have no idea. Hinge is still reasonably popular, but Hinge– or very popular, but Hinge is also a very different brand with a very clear image and serving somewhat of a different use case than Tinder is.
Tobias: What’s the difference?
Alex: Hinge is very–
Jake: Keep it PG here, Alex.
Alex: It’s very explicitly for relationships.
Tobias: Whereas Tinder is more for hookups.
Alex: Tinder is, yeah, more a bit of everything hookups and yeah, basically anything on the dating spec and it’s the biggest one by quite a margin. But yeah, point being, so I don’t totally know in either of those categories whether or not we’re seeing material changes in how the younger generation is thinking about how they’re going to interact here. Brown-Forman’s interesting because they have– It being in whiskey, they have obviously a high percentage of the business that’s aged and they have to in some ways kind of guess what supply and demand will look like a couple years out. And Whiskey went through a significant boom throughout the 2010s and now is in a place where it might be more challenging on the back end. So, it’ll be interesting to watch them navigate that.
Tobias: So, you haven’t seen. There’s no demographics. There’s no suggestion in the data that the younger generations aren’t drinking as much because anecdotally I’ve found that to be true, but I’ve never looked at the data.
Alex: I haven’t seen clear data that says that for sure. But I would think anecdotally I would have the same conclusion that there is some change happening there. Now is it overall alcohol consumption declining? Is it premiumization as we see in a lot of categories, which potentially would play to the benefit of a company that specializes in liquor or whiskey? I’m not positive on that. I haven’t seen really clean data that. I mean, some of the data I’ve seen, at least for American consumers, suggests that alcohol consumption has been on the rise overall, but that wasn’t broken out by demographic. And it also again, probably includes a certain amount of tailwind from pandemic.
Jake: Stressful election season. You got to somehow–
Alex: Exactly.
Tobias: Pandemic has that pig going through the python. The pandemic pig going through the python makes it hard to kind of figure out
Jake: Normalize anything.
Tobias: That’s five years now. Coming up on five years now. Wow.
Alex: Yeah, it’s pretty crazy.
Tobias: I find the alcohol conversation kind of interesting because they’ve always been the argument was always that even in a recession people don’t stop drinking beer. If anything, they drink more going into a recession, so you’re pretty.
Jake: We’re done with those now though. Toby, didn’t you see permanent new high plateaus for everything?
Tobias: Yeah, you don’t need to worry about that. There are no more recessions. So yeah, there’s a comment here that alcohol is fairly cyclical. Guinness consumption is growing at an insane rate because it’s just [crosstalk] healthier. The Irish are drinking more.
Alex: Yeah, I was just pulling up a chart for Jack Daniels Tennessee Whiskey, just the main label, not for any of the extensions. And it does look like there was a bit of a slowdown in 2008, 2009 in terms of consumption. But in general, they’ve gone from 6-million 9 liter cases at the turn of the century to right around 14 million last year. So not a ton of volume growth, but reasonably good. Particularly as I think they’ve had some component of again like price mix in there as they’ve introduced some premium brands. But yeah, it’s an interesting.
It’s another example where in this case you have the founding family that has control. And as I wrote about it here recently, in my mind there’s some questions around what are the incentives of a stakeholder like that as they think about managing this entity and how does that play into decision making around M&A versus acquisitions and how much of the– The new CEO, to make this clear in his first shareholder letter, specifically wrote something along the lines of a priority is maintaining the independence of the Brown-Forman incorporation, which I could understand why that’s a desirable outcome for someone potentially if they’re very wealthy and they control the company and there’s a certain benefits associated with that.
But it also makes me wonder if you’re then staring at a 100-million-dollar pot of cash that you need to allocate, how does it feel to repurchase shares versus to go out and buy something that’ll make you larger and harder for somebody else to swallow? And how much is that a better use or as good of a use of capital? And they have a history of M&A and they’ve now recently bought some of the rising kind of gin and rum brands and paid a decent amount of money for them. They paid at $1.2 billion collectively on a company with call it a 15- or 16-billion-dollar market cap.
At the same time they were shedding some of these legacy brands that had their day in the sun but then had kind of run into a wall for one reason or another. And as you can imagine, multiple paid on that first bucket of businesses is quite a bit different than the multiple received on that second bucket of businesses. So, I just wonder, as you think about a business like that, how likely is it that the capital allocation strategy is going to look like that going forward? Without a clear answer to that question, I then think you have a problem in terms of how you think about what the equity is worth because there’s going to be, that’s going to have a material impact on the per share value of the enterprise over 20 years. So just one of those interesting things to think about as you know, truly imagine partnering with someone versus hey, it trades at a discount on the Ford PE to Diageo or something.
Jake: Where are the easy decisions in this game?
Alex Yeah.
Jake: It’s one hard thing after another.
Tobias: Just going to buy back man, go to beach.
Jake: Jesus.
Alex: Yeah, I’ve been, for anybody who reads my work, I’ve been buying Dollar Tree fairly aggressively for me as of late. And I certainly wouldn’t say it’s an easy decision, but it’s one that I think has a lot of merit. Obviously, we’ll see in due time. And it’s funny to see I have not received a lot of feedback on the idea.
Tobias: A lot of [crosstalk]
Alex: That suggests others are not that they’re against the idea, but I don’t think other people are particularly interested one way or the other with the idea. So maybe that’s a good thing. We’ll see. We’ll see how it works out. But yes, I think those are the ideas that might be looking interesting at the moment. The ones that people are not too fond of.
Jake: Well, if you can’t feel a little bit of bile rising in the back of your throat, it’s not going to be that good of an opportunity.
Alex: I’m feeling it. I’m feeling it.
Tobias: Patrick Murphy has commented, and I think that with a name like that, you Irish bona fides are assured. He says it’s not even a thing in Ireland. I think he means Guinness. You want to clarify that for us, Patrick? And then Value Hurts says, “All young people at my firm drink Guinness. All use nicotine, but not smoking.” I’ve heard that too. So, there’s not a lot of people who smoke, but they’re all in the– Nicotine was demonized, has been demonized for a long time now. But now there’s guys like Huberman and somebody else in that sort of health influencer space who said that they use like nicotine lozenges or whatever that kind of like there’s non-smoking nicotine.
Jake: A bunch of new kind of ways to get it into your body, apparently.
Tobias: Yeah, it’s like—And you do that to avoid the afternoon crash. So, it’s an enhancement. It’s not a negative anymore.
Alex: Yeah, it’s funny, I was walking through Publix today at my local grocery store and just looking at energy drinks, but also just call it sports drinks generally, I mean, which covers a lot of ground now in terms of what’s defined as a sports drink. But it’s funny. Well, no nicotine, not yet, I don’t think. I didn’t look closely enough. But it’s funny to see an energy drinks, even a category where you walked in there six months ago and you thought, man, this is crowded. And there’s still three or four more new brands that are getting a little bit of shell space. And same in sports drinks, it’s just funny to see how those categories– I mean, obviously they’re certainly moving volume, which speaks to why it’s partly happening, but it’s funny to see how those things kind of shake out and evolve over time or even to think about a Gatorade and a Powerade the way that we probably thought of them 10, 20 years ago and how it looks now, it speaks to how things change. Things change a lot and it’s really interesting to watch.
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The Impact of Changing Media on Consumer Brands
Jake: Yeah, there’s an interesting thought experiment of– There’s so many big consumer brands that cut their teeth and really became dominant when there were only three television channels. So, you had a very locked up sort of distribution and awareness and you needed scale then to be able to buy national TV programming. And so, the winners got huge. They built huge brands like they were unassailable. They could spend the most on R&D, they could stay in front of everybody. But then with the Internet, like the distribution costs went to zero and then you see things like Dollar Shave Club and all these other like little brands, influencer brands pop up and it’s like, boy, it seems like a Cambrian explosion of trying to figure out what’s a good business here or not.
Like, I think it’s become quite difficult and I’m not sure we’re going to see brands anymore that we saw like a Kraft Heinz or a, a Gillette or even maybe a Coke at some point. It’s just too hard. There’s only so many hours in the day and your eyeballs can only look at so much in a day that you can’t get enough mind share anymore like you could in the 1950s and 1960s when there were only three channels.
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The Role of Costco and Private Labels
Alex: Yeah. A company like Costco that has effectively told its customers the trust that you felt you need to have in a brand in any given category. [crosstalk] Just port that over to our brand and It’ll cost 30% less or the vendor is going to make significant concessions to– I mean, I think about it as. I own Fever Tree, which is a small company, and I think about them being in Costco and what that entails. And it’s interesting to think about the power that Costco has. And again, like as were just talking about, there’s 25 different energy drinks they seem to stock. At least where I shop at Costco, they seem to stock four of them or so still, but there will probably be a point in time where they’ll potentially whittle that down, and when they do, they will have some interesting conversations with those various companies.
Jake: Yeah. The good news is you’re going to get a ton of volume. The bad news is you’re not going to make any money on it.
Tobias: Any on each one. Hey, Alex, we’re Coming up on time, the name of your book is Buffett and Munger Unscripted. Available in all good bookstores. Where can people buy it?
Alex: Yeah, I think it’s available every– It’s available on Amazon. I’m working to get it in Barnes and Noble stores, which is an interesting process to be going through, but yeah, it’s still a thing. And yes, they look to Amazon sales as a signal of whether or not to stock products. And non-fiction is apparently a difficult category anyways. But they also are not too fond of you discussing Amazon in your social media interactions, so a little bit of a chicken in the egg there, but we’re going to figure it out Barnes and Nobles, don’t worry, we’ll get there.
Tobias: And if folks want to follow along what you’re doing or get in touch with you, what’s the best way to do that?
Alex: Yeah, thescienceofhitting.com for TSOH Investment Research and on the Twitter machine, @TSOH_investing.
Tobias: JT, Journalytic?
Jake: Sure.
Tobias: You want to pitch it?
Jake: Everyone’s already heard it. But yeah, I mean–
Tobias: [crosstalk]
Jake: Yeah, if you want to get your intuition, work on that. I feel like it’s a bit like the– And maybe with more volatility there is the even more important it is for you to be writing down your thoughts and thinking through things because these are like your performance and your outcome is going to be dictated on how you behave in like 2% of the most difficult times. And so, if you’re not keeping track of that and writing it down, then I think you’re really doing yourself a disservice and you’re going to make the game a lot harder than it has to be.
Alex: As someone has to write a lot for their job, I 100% endorse that message. Writing things down is the greatest way to learn how your mind is tricking you if you’re not writing stuff down.
Tobias: Yeah, writing it down is the quickest way to learn that you don’t understand what you’re talking about.
Jake: But then going back and looking at it and recognizing how much you really didn’t understand what you were talking about.
Tobias: Yeah, later.
Jake: My gosh.
Tobias: Thanks, Alex. The Science of Hitting. Thanks, JT. As always, folks. Will be back next week. Same bat time, same bat channel.
Jake: Thanks, Alex.
Tobias: See you then.
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