23: The Known Unknowns: Using the spectrum of intelligence in investing and life with Christopher Begg

Books mentioned in this episode: 

The Matter with Things by Iain McGilchrist  

Lila: An Enquiry into Morals by Robert M. Pirsig 

Zen and the Art of Motorcycle Maintenance by Robert M. Pirsig 

Poor Charlie’s Almanack by Charles T. Munger 

Stay Connected:

Christopher Begg 

Website: https://www.eastcoastasset.com/ 
 

LinkedIn: https://www.linkedin.com/in/christopherbegg/
 

TRANSCRIPT BEGINS:
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Welcome to the Investing the Templeton Way podcast.

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I'm your host, Lauren Templeton.

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And I'm your co-host, Scott Phillips.

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And I'm excited about today's guest, Christopher Begg.

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So Christopher is the Chief Executive Officer,

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Chief Investment Officer, and co-founder

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of East Coast Asset Management.

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He is also currently serving as an adjunct associate professor

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at the Heilbrunn Center of Graham and Dodd

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investing at Columbia Business School

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where he teaches security analysis.

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And if my listeners don't know, this is a very famous course

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at Columbia University that was originally taught by Ben Graham.

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And then in 1951, I believe, Warren Buffett

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was one of the students in the class.

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So it's very prestigious to have this position

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teaching the course and you teach it in the fall.

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And I originally met Chris at a Templeton investment

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roundtable in London pre-COVID.

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So I'm thinking this was probably 2017, 2018, something like that.

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And was fascinated.

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he managed his money from one of the Templeton foundations.

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I was fascinated by his investment philosophy.

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He manages just a very concentrated portfolio.

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So we'll get into all of these details today.

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But we want to welcome you, Chris.

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Thank you, Lauren.

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It's great to be here.

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Thank you, Scott.

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Yeah, so tell us a little bit about your history,

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how you got started in investing, how you ended up

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as an adjunct professor at Columbia University

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teaching this important course.

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Where'd you get started?

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Yeah, so my  journey started over 20 years ago.

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And I was fortunate to have a father who was also

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working in the service industry.

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He was an accountant.

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And I kind of looked at what he was doing in accounting

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and kind of being held accountable to others.

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And so I told him when I was young, I was like,

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I want to be an accountant too.

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And he said, no, you don't.

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And basically kind of steered me in the direction

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to do something else, but similar.

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I definitely had an interest in numbers and loved reading

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and things like that.

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So I ended up finding my way to investing right out of undergrad.

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I was lucky enough to get a position as a research analyst.

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And basically did anything I could to spend more time kind

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of reading annual reports.

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And I was lucky enough early on to stumble

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on the teachings of Warren Buffett and Charlie Munger

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through a lot of the Berkshire Hathaway and the reports

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and so forth.

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So that was-- once I read that, everything changed for me.

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I kind of understood that I wanted the type of investor

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that I really matched my temperament.

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And I spent about 10 years at my first job, a

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firm called Boston Research and Management.

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And shortly after that, I was

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already to kind of go off of my own and launch something

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that I thought really could be my own canvas.

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Buffett talks about painting your own canvas.

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And that was important to me at some point.

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And my co-founder was willing to do a lot of the operations.

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And I was able to focus primarily just on research, just

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on thinking about how to build really a long term oriented

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portfolio that was thinking about how

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we compound returns at superior rates

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over the longest duration.

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So what we're doing now is a really sub10 business portfolio

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thinking about really long term returns that we're really proud of.

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You would ask about the class.

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The initial connection to Columbia Business School

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and Security Analysis was really having interns

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that were part of the value investing program there,

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which I thought was best in the world.

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Still do think it's best in the world.

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Have them intern at our firm.

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And one thing led to another.

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And I was able to meet Bruce Greenwald, who

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I respected quite a lot, Competition Demystified --

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still one of my favorite books.

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Bruce and I worked on a handful of students together.

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I was-- they were able to work at East Coast and get credit.

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And Bruce was the professor on that.

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So he asked me if I'd be willing to teach a course.

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And I just said, well, you want me to teach?

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He said, oh, just teach what you do.

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And I said, oh, I can do that.

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And so I framed really a curriculum that I thought

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made sense that was still open enough to consider

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all the different types of value investing there is.

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And I've had a lot of fun with it.

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The course has evolved.

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And I think about it as a research laboratory.

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It's a way to come in, the way Ben Graham I

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think did in those early years, and talk about what's

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relevant in the world, talk about what was relevant,

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and what operators we should learn from, what

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investors I think can shine a light on truths

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about business in operating and investing principles.

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And I think some of the things I've seen now come back

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is seeing these students go off and be incredible investors.

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And there's a reciprocation there that's really

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been a real benefit to the whole experience.

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Yeah, I was about to ask, who do you think gets more from the course,

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your students?

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Or you?

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Because I can imagine that doing this every fall,

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designing the course, listening to the speakers,

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connecting with the students, talking about things

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that are relevant today, that really keeps you very fresh

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and keeps your mind working on investment problems

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or opportunities.

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And I will say, one of my esteemed speakers was Lauren and Scott.

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We had fun.

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I think it was-- you guys are due to come in.

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I think it's been three or four years, so--

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Well, don't put us on your list because we don't

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deserve to be there.

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You have had just some of the most amazing speakers.

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Do you want to review for the audience quickly

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who some of your esteemed speakers are, maybe who some

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of your favorite ones have been over the years?

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Yeah, so what I try to pull from in kind of giving

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a full perspective.

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So a lot of people might not know, but Ben Graham

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would use to open his course with a Spinoza quote,

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"Subspecie Aeternitatis", which

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means to see things under the aspect of eternity.

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And so when I think about what would

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be a full security analysis, of course it would be,

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is to think, how would they get exposed to operators?

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So some of the great operators we've had in,

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we have the Mendelson's from Heico that come under here.

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It's a 30-year record of 20% percent compounded returns,

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just so incredible the way they've run that business.

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And when they come in, they bring their wives.

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They bring the kids.

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And it's such an incredible feeling of connection

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that they have to the school.

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Larry went there and Victor and Eric have gone there.

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So that's fun.

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We have Frank Slootman from Snowflake, just a great operator.

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He's come in now, perennially, the last three years.

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I've had Glenn Fogel from Price Line and Booking

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on the investor side, Todd Combs, who sat in one

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of those seats that the students did.

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He's come in now every year for the last 10 years.

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And he's been just a great guest to see his evolution

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first as an investor, and now as an operator, running Geico.

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And working side-by-side with Warren and Charlie

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is just an incredible wealth of knowledge.

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We have Howard Marx usually is one of our bookend speakers

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every year.

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Yeah, so usually what I was trying to do

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throughout-- just to finish off, our thinkers

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and philosophers-- one of my favorite books that's come up

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last few years is The Matter with Things.

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And Iain McGilchrist talking about left and right hemisphere

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thinking and brain science.

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And if you have his book, it's literally a tome.

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It's two big books, but it's fantastic.

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And so Iain came in and we shared left first right brain

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thinking, which I think the students are--

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tend to be oriented that way.

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I think all of us are oriented toward one way or the other.

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So the lesson there is, do we have a side that we can nurture?

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If it's not our natural strength to be creative and right

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brained, and we're more analytical and left brained, which

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I think a lot of analysts that come into our industry are,

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can we nurture qualities and habits that can amplify that?

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Or do we surround ourselves with others that can help amplify that?

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And so those are kind of fun things that are usually

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topical to me, and it's kind of enjoyable to share

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that experience with the students.

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Yeah, it's fascinating.

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I would think that the average student in finance

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would be left brain oriented.

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So how do you nurture that right side of your brain

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to be more creative and see the bigger picture?

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That's right.

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And Lauren, I think that's the--

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it's not just the creativity that our right brain develops,

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but it's also context.

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So we've seen this with right hemisphere strokes

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is that the patients actually lose context,

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and they may retain language, which is left brain,

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but they don't understand how to put things together.

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And I think in investing, stepping back

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and seeing the whole picture is so valuable.

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And the fact that that's the part that isn't as attractive

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to investing gives these right brain thinkers,

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I think a little bit of an edge if they can harness it.

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So how do we harness a more right brain orientation?

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I think creative hobbies, whether it's

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the arts or whether it's having a real methodology

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for multi-disciplinary learning, learning across disciplines,

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forcing yourself to say, I'm going to spend on this subject

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in physics or this subject in biology,

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and not being so deeply focused on one thing,

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but having a breadth of knowledge is somewhere where I think

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you can develop some of these right brain habits.

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Well, I want to talk to you about that,

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because I've heard you mention before how--

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and I may not be saying this the way you want me

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to, but that you have a habit of identifying a subject

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that you want to learn about.

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And you give yourself three months,

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and you go as deep as you can on that subject in three months.

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And then you move on to another subject.

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Can you talk about that habit and how

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that is helpful to your investment philosophy?

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I think about it in four dimensions, really.

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I think the first dimension is either

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we're oriented to more of a depth of understanding of one subject,

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or that we know a little bit about a lot of things.

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So I was more--

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I wanted to know a little bit of a lot of things

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earlier in my learning.

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I would take a recommendation to read this book or that book,

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but I wasn't aware that I wasn't getting a depth of understanding.

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So this habit of taking three months to go deeper

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in really reading every single thing that was oriented around that subject.

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So something as crazy as humpback whales.

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So that was like a subject maybe three months ago,

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not three months ago, but last year.

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And just talking to experts on it,

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visiting different museums and really understanding

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that mammal species, how it evolved and skeleton structures,

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and how it communicates with others, echolocation.

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And so by doing that, you've just developed

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a real nuanced understanding of something

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as simple as humpback whales.

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And so I've done that now, and I've done it for 10 years.

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It's really helped me recognize patterns across different fields

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and across different --

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And I think in terms of kind of four buckets,

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either physics, biology, human history,

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and you can kind of segment chemistry in there,

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kind of in between physics and biology.

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And so when I orient these kind of three month tasks,

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I'll kind of say, OK, this is an area that I'm going to delve

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into, it interests me, I'm curious about it.

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Yeah, so that dimensional, you go from one,

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to kind of a two dimensional breadth and depth.

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The third dimension is what I kind of refer to as height.

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And that's seeing that timeline of the whole -- kind

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of where this subject orients in the whole timeline.

252
00:13:44,920 --> 00:13:47,360
And then the fourth is this idea of networks,

253
00:13:47,360 --> 00:13:50,480
and how networks can kind of increase

254
00:13:50,480 --> 00:13:52,280
a flow of information.

255
00:13:52,280 --> 00:13:54,320
And that could be through our own networks

256
00:13:54,320 --> 00:13:59,480
or through just the way that networks scale.

257
00:13:59,480 --> 00:14:04,600
And so that's been the process, and it's been useful to me.

258
00:14:04,600 --> 00:14:05,840
I've shared it with others.

259
00:14:05,840 --> 00:14:07,800
How do you choose the subject?

260
00:14:07,800 --> 00:14:09,320
It usually chooses me.

261
00:14:09,320 --> 00:14:14,240
Things will just keep bumping into me.

262
00:14:14,240 --> 00:14:15,120
It's funny.

263
00:14:15,120 --> 00:14:17,200
I'll tell this little story of, there's

264
00:14:17,200 --> 00:14:22,400
a bookstore in a little town that I spend a lot of time in the winter.

265
00:14:22,400 --> 00:14:25,600
And I walk into that bookstore, and it's tiny,

266
00:14:25,600 --> 00:14:28,320
but it's so well curated.

267
00:14:28,320 --> 00:14:31,920
And each book, I'll kind of walk in and like,

268
00:14:31,920 --> 00:14:34,920
if the book wiggles at me, like, I'll want to read it.

269
00:14:34,920 --> 00:14:37,280
It literally is like a--

270
00:14:37,280 --> 00:14:39,400
there's usually something that will just speak to me.

271
00:14:39,400 --> 00:14:42,840
That's how these subjects are.

272
00:14:42,840 --> 00:14:44,320
They just kind of speak to me over time,

273
00:14:44,320 --> 00:14:46,760
and I'll just want to dive in.

274
00:14:46,760 --> 00:14:49,400
You know, Chris, one of the things that jumps out to me

275
00:14:49,400 --> 00:14:51,840
after listening to part of this discussion,

276
00:14:51,840 --> 00:14:54,840
and I think you had spoken about it before,

277
00:14:54,840 --> 00:14:58,200
is when you venture into these other

278
00:14:58,200 --> 00:15:02,040
disciplines, and you really peer into them and explore them

279
00:15:02,040 --> 00:15:04,680
and think about them, you start to peel back

280
00:15:04,680 --> 00:15:08,760
these kind of universal laws or universal truths

281
00:15:08,760 --> 00:15:10,920
of what works across disciplines.

282
00:15:10,920 --> 00:15:14,120
And it often-- maybe we're warped because we spend so much time

283
00:15:14,120 --> 00:15:16,960
thinking about investing, but it often applies to investing.

284
00:15:16,960 --> 00:15:20,960
Like, just the ideas of compound interest,

285
00:15:20,960 --> 00:15:23,600
and things of that nature.

286
00:15:23,600 --> 00:15:25,640
Have you run across that where you're learning

287
00:15:25,640 --> 00:15:30,360
and multi-disciplines tie back and strengthen your investing

288
00:15:30,360 --> 00:15:31,600
acumen? 

289
00:15:31,600 --> 00:15:33,160
That's exactly right, Scott.

290
00:15:33,160 --> 00:15:37,640
I think the light that went off for me was two-fold.

291
00:15:37,640 --> 00:15:45,000
It was reading a lot about what Charlie Munger would talk about.

292
00:15:45,000 --> 00:15:48,440
Charlie talked a lot about these threads of knowledge

293
00:15:48,440 --> 00:15:50,720
that kind of flow through.

294
00:15:50,720 --> 00:15:58,960
And in Peter Kaufman, Peter has a phenomenal skill

295
00:15:58,960 --> 00:16:00,680
at identifying these general principles

296
00:16:00,680 --> 00:16:03,440
and how they apply across disciplines.

297
00:16:03,440 --> 00:16:07,040
And Peter obviously was the editor of Poor Charlie's Almanack.

298
00:16:07,040 --> 00:16:11,600
So these two individuals together are just superpowers

299
00:16:11,600 --> 00:16:12,640
at this.

300
00:16:12,640 --> 00:16:16,080
But you mentioned compound interest, Scott.

301
00:16:16,080 --> 00:16:20,400
A lot of people think that that's an artifact of investing.

302
00:16:20,400 --> 00:16:22,760
And I think it's incredible, right?

303
00:16:22,760 --> 00:16:25,520
It's the eighth wonder of the world.

304
00:16:25,520 --> 00:16:28,080
But I think it has deeper roots of it.

305
00:16:28,080 --> 00:16:34,440
You really think about physics at its most granular state.

306
00:16:34,440 --> 00:16:36,240
There's an essence of compound interest

307
00:16:36,240 --> 00:16:40,440
at the core of what everything has emerged from.

308
00:16:40,440 --> 00:16:47,280
It's a fantastic thing as an investor

309
00:16:47,280 --> 00:16:50,240
that we get to play with this very powerful

310
00:16:50,240 --> 00:16:52,680
universal law.

311
00:16:52,680 --> 00:16:54,760
But yeah, that's exactly right.

312
00:16:54,760 --> 00:16:58,480
Sir John loved that subject, the laws of life,

313
00:16:58,480 --> 00:17:01,240
and universal laws that kind of guide the universe

314
00:17:01,240 --> 00:17:02,760
in these mysterious ways.

315
00:17:02,760 --> 00:17:06,680
And in fact, he funded an essay contest

316
00:17:06,680 --> 00:17:08,840
around the US and later around the world

317
00:17:08,840 --> 00:17:11,160
where young elementary school children would

318
00:17:11,160 --> 00:17:15,000
try to write about what the laws of life were to them.

319
00:17:15,000 --> 00:17:18,320
And Sir John had very varied interest.

320
00:17:18,320 --> 00:17:21,040
It just makes me think of him during this discussion.

321
00:17:21,040 --> 00:17:23,400
And one of the things-- and this is very philosophical--

322
00:17:23,400 --> 00:17:26,880
but it also has a thread of compound interest in it,

323
00:17:26,880 --> 00:17:30,520
is he had this one quote, and he was deeply interested

324
00:17:30,520 --> 00:17:33,760
in philosophy and religion and spiritual matters.

325
00:17:33,760 --> 00:17:36,280
And he said, "It's so off topic for an investor,

326
00:17:36,280 --> 00:17:37,920
but it's so true when you think about it,

327
00:17:37,920 --> 00:17:38,680
and it's fascinating."

328
00:17:38,680 --> 00:17:41,240
He says, "The more love we give away,

329
00:17:41,240 --> 00:17:42,920
the more we have left.

330
00:17:42,920 --> 00:17:46,320
The laws of love differ from the laws of arithmetic.

331
00:17:46,320 --> 00:17:49,160
Love hoarded dwindles, but love given grows."

332
00:17:49,160 --> 00:17:52,680
And this is a concept of marrying something spiritual

333
00:17:52,680 --> 00:17:55,520
with something that's almost like inherent to compound

334
00:17:55,520 --> 00:17:59,320
interest, that something grows and expands over time.

335
00:17:59,320 --> 00:18:01,200
It's a fascinating subject.

336
00:18:01,200 --> 00:18:04,680
But I do think going back to like the left and right

337
00:18:04,680 --> 00:18:10,000
brain matter, which kind of got us off on this course,

338
00:18:10,000 --> 00:18:13,760
the really great investors all kind of tapped into something

339
00:18:13,760 --> 00:18:16,040
out of the right side of their brain.

340
00:18:16,040 --> 00:18:18,760
You just see so much creativity and 

341
00:18:18,760 --> 00:18:21,520
Sir John, innovating into international markets

342
00:18:21,520 --> 00:18:23,920
and Warren Buffet with what he did with Berkshire

343
00:18:23,920 --> 00:18:26,280
Hathaway, is just this ultimate flexing

344
00:18:26,280 --> 00:18:28,840
of creative thinking and analytical thinking

345
00:18:28,840 --> 00:18:32,040
and got Charlie Munger in the mix, and they reinforce it.

346
00:18:32,040 --> 00:18:34,440
It's really cool stuff.

347
00:18:34,440 --> 00:18:39,240
So I guess my question is as a professor,

348
00:18:39,240 --> 00:18:41,960
what do you do to cultivate that exploration

349
00:18:41,960 --> 00:18:45,080
of the right side of the brain among your students?

350
00:18:45,080 --> 00:18:47,160
Thanks for reading that quote.

351
00:18:47,160 --> 00:18:48,520
And Scott, you have to send me that quote.

352
00:18:48,520 --> 00:18:49,440
That is beautiful.

353
00:18:49,440 --> 00:18:58,560
I think the-- I think we incorrectly

354
00:18:58,560 --> 00:19:00,640
see the world very linearly.

355
00:19:00,640 --> 00:19:03,480
Where 1 plus 1 equals 2.

356
00:19:03,480 --> 00:19:08,240
And when you see that the world is complex,

357
00:19:08,240 --> 00:19:09,040
It's complex.

358
00:19:09,040 --> 00:19:10,600
Where 1 plus 1 equals --

359
00:19:10,600 --> 00:19:11,880
Much more.

360
00:19:11,880 --> 00:19:17,800
And that complex systems are sensitive

361
00:19:17,800 --> 00:19:20,240
to initial conditions and feedback loops.

362
00:19:20,240 --> 00:19:22,720
So I think what Sir John was talking about is this,

363
00:19:22,720 --> 00:19:25,600
when you move from scarcity where there's not

364
00:19:25,600 --> 00:19:29,520
enough, to abundance, there's a leaping

365
00:19:29,520 --> 00:19:31,760
emergent effect, just like in complex systems.

366
00:19:31,760 --> 00:19:39,720
And we're playing in the world of exceptional companies.

367
00:19:39,720 --> 00:19:41,280
I mentioned the Mendelson's.

368
00:19:41,280 --> 00:19:43,020
Where as an investor, you're like, oh, I

369
00:19:43,020 --> 00:19:44,920
didn't expect to get that.

370
00:19:44,920 --> 00:19:46,200
I didn't expect,

371
00:19:46,200 --> 00:19:47,640
I didn't model for it.

372
00:19:47,640 --> 00:19:49,720
And I think that's how--

373
00:19:49,720 --> 00:19:54,960
I think that's what a good life is, right, is you keep giving.

374
00:19:54,960 --> 00:19:57,560
And you keep getting more.

375
00:19:57,560 --> 00:20:00,240
So to nurture it, 

376
00:20:00,240 --> 00:20:01,320
It's hard to Columbia.

377
00:20:01,320 --> 00:20:05,120
I'll tell you because I think a lot of those students

378
00:20:05,120 --> 00:20:07,440
are very much in a hurry.

379
00:20:07,440 --> 00:20:08,680
But they've come.

380
00:20:08,680 --> 00:20:09,920
They're in New York City.

381
00:20:09,920 --> 00:20:11,680
There's a lot of competition for jobs.

382
00:20:11,680 --> 00:20:15,400
There's a competition for how much you'll make.

383
00:20:15,400 --> 00:20:21,480
And what I'm trying to teach them is how do you pause a little bit

384
00:20:21,480 --> 00:20:25,040
and do it the right way?

385
00:20:25,040 --> 00:20:30,520
So I think that's what--

386
00:20:30,520 --> 00:20:33,240
I think that's what Sir John was talking about there.

387
00:20:33,240 --> 00:20:35,960
I've heard you compare--

388
00:20:35,960 --> 00:20:37,960
and this is speaking of complex systems.

389
00:20:37,960 --> 00:20:42,240
I've heard you compare quantum mechanics to investing,

390
00:20:42,240 --> 00:20:46,280
which I thought was such a great, great way to describe it.

391
00:20:46,280 --> 00:20:47,960
The unknown.

392
00:20:47,960 --> 00:20:51,120
Can you describe that a little bit for the audience?

393
00:20:51,120 --> 00:20:52,720
Oh, that's great.

394
00:20:52,720 --> 00:20:54,320
So I'm just finishing a piece called

395
00:20:54,320 --> 00:20:56,320
The Joys of Unknowing.

396
00:20:56,320 --> 00:20:59,680
So this concept of unknowing has been something

397
00:20:59,680 --> 00:21:02,560
I've been thinking about now, very deeply for a long time.

398
00:21:02,560 --> 00:21:04,080
But now it's on paper.

399
00:21:04,080 --> 00:21:14,240
So when,  the known world is what we can point at.

400
00:21:14,240 --> 00:21:20,040
And as we go into, I think, a spectrum of intelligence

401
00:21:20,040 --> 00:21:22,160
and truth and what's real is you're

402
00:21:22,160 --> 00:21:24,160
going from the known to the unknown.

403
00:21:24,160 --> 00:21:28,360
And I think especially in investing,

404
00:21:28,360 --> 00:21:30,440
it's crossing these realms.

405
00:21:30,440 --> 00:21:35,240
And so just the four tiers that I think about are knowledge

406
00:21:35,240 --> 00:21:40,520
to wisdom, which is experience knowledge, to intelligence,

407
00:21:40,520 --> 00:21:44,800
which is making something complicated, simple.

408
00:21:44,800 --> 00:21:47,800
It's allowing more information to flow through a system

409
00:21:47,800 --> 00:21:49,520
that could be personal, could be business,

410
00:21:49,520 --> 00:21:51,520
could be investing.

411
00:21:51,520 --> 00:21:56,720
To this last pillar, which is virtue, quality, excellence,

412
00:21:56,720 --> 00:22:00,800
and that's the full unknown.

413
00:22:00,800 --> 00:22:03,440
And that's where the magic really happens.

414
00:22:03,440 --> 00:22:06,760
So in quantum mechanics, when we try to go deep, deep, deep

415
00:22:06,760 --> 00:22:09,440
to figure out that thing, what we figure is the thing

416
00:22:09,440 --> 00:22:12,040
that we are thinking, there's no thing.

417
00:22:12,040 --> 00:22:16,760
It's this quality that exists at that unknowing.

418
00:22:16,760 --> 00:22:22,600
And so what I've arrived at in this of kind of joys

419
00:22:22,600 --> 00:22:24,760
of unknowing is this, is how do we

420
00:22:24,760 --> 00:22:27,720
live at the leading edge of the train, what

421
00:22:27,720 --> 00:22:30,440
Pirsig called in his book, Zen and the Art of Motorcycle 

422
00:22:30,440 --> 00:22:31,280
Maintenance

423
00:22:31,280 --> 00:22:34,480
It's like dynamic quality or aréte or excellence

424
00:22:34,480 --> 00:22:38,080
lives on that dynamic edge, that leading edge.

425
00:22:38,080 --> 00:22:40,680
And that leading edge is an unknowing.

426
00:22:40,680 --> 00:22:43,720
It's an asymmetry that exists at the horizon edge.

427
00:22:43,720 --> 00:22:52,120
And so what I've seen in businesses and systems

428
00:22:52,120 --> 00:22:54,560
that truly create value in the world

429
00:22:54,560 --> 00:22:56,600
is they're right there.

430
00:22:56,600 --> 00:22:59,000
And you can't point to that one thing.

431
00:22:59,000 --> 00:23:02,320
It's just-- it's emerging and manifesting ahead of them.

432
00:23:02,320 --> 00:23:06,280
Yeah, I've written down something that you said, which

433
00:23:06,280 --> 00:23:09,600
is just that the uncertainty that physicists deal with

434
00:23:09,600 --> 00:23:13,600
is similar to the uncertainty investor's face.

435
00:23:13,600 --> 00:23:14,800
And I love that.

436
00:23:14,800 --> 00:23:20,320
Scott's always saying that in our office, he's like, well,

437
00:23:20,320 --> 00:23:21,440
it's a good decision.

438
00:23:21,440 --> 00:23:23,680
It may not have a good outcome.

439
00:23:23,680 --> 00:23:24,920
You never know.

440
00:23:24,920 --> 00:23:28,280
You're always dealing with uncertainty in any decision.

441
00:23:28,280 --> 00:23:35,280
Yeah, just to be clear, because we don't invest

442
00:23:35,280 --> 00:23:38,400
with the idea that things could be uncertain.

443
00:23:38,400 --> 00:23:39,840
We want them to be asymmetric.

444
00:23:39,840 --> 00:23:42,840
And we like certain uncertainties.

445
00:23:42,840 --> 00:23:45,820
And so certain uncertainties are really interesting.

446
00:23:45,820 --> 00:23:51,240
The ones that you-- particularly if you're

447
00:23:51,240 --> 00:23:53,240
in the right system.

448
00:23:53,240 --> 00:23:56,280
Now, Berkshire Hathaway, we'll use that as an example.

449
00:23:56,280 --> 00:24:01,120
How would they do in a really uncertain, volatile environment?

450
00:24:01,120 --> 00:24:02,480
Well, they're going to thrive.

451
00:24:02,480 --> 00:24:04,480
They're going to actually emerge better

452
00:24:04,480 --> 00:24:08,400
from that experience than the lion's share of all their companies

453
00:24:08,400 --> 00:24:10,160
because they're built for that.

454
00:24:10,160 --> 00:24:13,920
And so we love to invest behind companies that

455
00:24:13,920 --> 00:24:20,280
are anti-fragile, said that they built for the 100-year flood.

456
00:24:20,280 --> 00:24:23,320
Everyone else is built for the five-year flood table,

457
00:24:23,320 --> 00:24:25,040
not the 100-year flood table.

458
00:24:25,040 --> 00:24:28,080
And so that's really kind of the certain uncertainties

459
00:24:28,080 --> 00:24:31,760
that we try to set ourselves up for.

460
00:24:31,760 --> 00:24:38,120
And I think in life, we're seeing this in the banking crisis,

461
00:24:38,120 --> 00:24:39,120
right?

462
00:24:39,120 --> 00:24:40,360
Yeah, sure.

463
00:24:40,360 --> 00:24:42,480
We could have got a little bit more yield

464
00:24:42,480 --> 00:24:43,760
by lengthening our duration.

465
00:24:43,760 --> 00:24:46,960
But what happens if interest rates spiked up quickly?

466
00:24:46,960 --> 00:24:49,520
And so you see how fragile these systems were

467
00:24:49,520 --> 00:24:51,760
when that happened.

468
00:24:51,760 --> 00:24:55,560
Yeah, so these certain uncertainties in quantum physics,

469
00:24:55,560 --> 00:24:58,640
as you said, are just wonderful little models

470
00:24:58,640 --> 00:25:05,240
to kind of see a fractal that exists across the world.

471
00:25:05,240 --> 00:25:08,600
I can't help but add that as an investor,

472
00:25:08,600 --> 00:25:11,960
you start to crave certain uncertainties

473
00:25:11,960 --> 00:25:14,480
because you know that's where the mispricings occur is.

474
00:25:14,480 --> 00:25:15,280
That's exactly right.

475
00:25:15,280 --> 00:25:20,840
In March of 2020, any other kind of catastrophic type of event,

476
00:25:20,840 --> 00:25:24,760
that's where the best opportunities lie, which is interesting.

477
00:25:24,760 --> 00:25:28,240
Yeah, since we're talking about quantum mechanics,

478
00:25:28,240 --> 00:25:29,280
like an electron.

479
00:25:29,280 --> 00:25:32,400
Like you try to find the electron, you can't find it, right?

480
00:25:32,400 --> 00:25:34,240
It exists in a cloud.

481
00:25:34,240 --> 00:25:38,520
And so clouds are what we are looking for.

482
00:25:38,520 --> 00:25:41,640
So if you hear a dialogue internally with my team,

483
00:25:41,640 --> 00:25:43,720
it's where are the clouds today?

484
00:25:43,720 --> 00:25:47,160
And we know that within the cloud, there's likely something

485
00:25:47,160 --> 00:25:48,640
that is mispriced.

486
00:25:48,640 --> 00:25:49,840
So where are the clouds today?

487
00:25:49,840 --> 00:25:51,640
Well, it's probably commercial real estate

488
00:25:51,640 --> 00:25:53,360
because that's kind of scary.

489
00:25:53,360 --> 00:25:55,040
We're not sure what that's going to look like.

490
00:25:55,040 --> 00:25:57,320
There's a lot of like moving parts, banks

491
00:25:57,320 --> 00:25:59,080
are being put back buildings.

492
00:25:59,080 --> 00:26:03,600
And we have this new paradigm of hybrid work.

493
00:26:03,600 --> 00:26:05,360
What's that look like?

494
00:26:05,360 --> 00:26:07,560
Well, certainly there's a cloud there.

495
00:26:07,560 --> 00:26:11,360
You could have looked back a year ago and looked at maybe

496
00:26:11,360 --> 00:26:12,640
some of these social media platforms

497
00:26:12,640 --> 00:26:16,120
that had a lot of clouds around different iOS changes

498
00:26:16,120 --> 00:26:17,840
and so forth.

499
00:26:17,840 --> 00:26:22,760
And so we try to identify macro clouds and micro clouds

500
00:26:22,760 --> 00:26:26,080
where we think there's likely some uncertainty.

501
00:26:26,080 --> 00:26:27,920
There's likely some fear.

502
00:26:27,920 --> 00:26:31,720
There's some apathy maybe that could create the environment

503
00:26:31,720 --> 00:26:32,760
for mispricing.

504
00:26:32,760 --> 00:26:36,560
And so that's really one of the most important things.

505
00:26:36,560 --> 00:26:39,240
I call these the known unknowns.

506
00:26:39,240 --> 00:26:42,520
We know there's a cloud, but it's kind of unknown.

507
00:26:42,520 --> 00:26:44,680
And that's the part of the work that we do as analysts is,

508
00:26:44,680 --> 00:26:49,880
let's create a probability tree to understand the known unknown.

509
00:26:49,880 --> 00:26:52,360
And if we can understand it, and we have a duration

510
00:26:52,360 --> 00:26:55,880
mismatch, meaning, hey, we're willing to kind of go

511
00:26:55,880 --> 00:26:59,120
through this period of uncomfort for a year.

512
00:26:59,120 --> 00:27:02,560
So then the other side of that will be rewarded.

513
00:27:02,560 --> 00:27:04,240
And that's generally been the case with,

514
00:27:04,240 --> 00:27:05,960
I think, a lot of things that have worked for us

515
00:27:05,960 --> 00:27:09,960
is just that willing to be a little uncomfortable

516
00:27:09,960 --> 00:27:13,800
in the uncertainty knowing that there's a certainty on the other side.

517
00:27:13,800 --> 00:27:15,760
Or an inevitability is probably a better way.

518
00:27:15,760 --> 00:27:21,440
A good value investor gets comfortable living in that space

519
00:27:21,440 --> 00:27:23,920
and learns to look forward to it.

520
00:27:23,920 --> 00:27:25,960
I mean, Uncle John didn't call it clouds,

521
00:27:25,960 --> 00:27:28,840
but moments of maximum pessimism, whether that

522
00:27:28,840 --> 00:27:33,720
would be in a security, an industry or a particular geography

523
00:27:33,720 --> 00:27:37,800
that that's where he really looked for opportunities.

524
00:27:37,800 --> 00:27:42,040
What other things do you look for when you're investing in a business?

525
00:27:42,040 --> 00:27:44,920
If you could just walk us through your process

526
00:27:44,920 --> 00:27:48,320
of how you make these investment decisions?

527
00:27:48,320 --> 00:27:50,160
Yeah.

528
00:27:50,160 --> 00:27:52,720
So three things that we're predominantly looking

529
00:27:52,720 --> 00:27:57,320
for in what we define as the exceptional company.

530
00:27:57,320 --> 00:28:02,680
Moat is most important, like competitive advantage.

531
00:28:02,680 --> 00:28:04,880
Why is it enduring through time?

532
00:28:04,880 --> 00:28:08,800
We're really trying to understand why should the moat widen

533
00:28:08,800 --> 00:28:12,680
over a five plus period, ideally 10 plus?

534
00:28:12,680 --> 00:28:18,160
So we have eight layers of that we're kind of drilling down there.

535
00:28:18,160 --> 00:28:23,040
And the second thing is secular tailwinds.

536
00:28:23,040 --> 00:28:25,240
So we tend to avoid most businesses

537
00:28:25,240 --> 00:28:27,080
that are facing secular headwinds.

538
00:28:27,080 --> 00:28:28,360
It's really hard for us to understand

539
00:28:28,360 --> 00:28:29,720
how quickly those may erode.

540
00:28:29,720 --> 00:28:33,400
I think nowadays versus five years ago,

541
00:28:33,400 --> 00:28:36,960
if there's a known secular tailwind, a headwind,

542
00:28:36,960 --> 00:28:39,520
it's probably going to be even--

543
00:28:39,520 --> 00:28:43,080
it's going to hit them even faster than what we've

544
00:28:43,080 --> 00:28:45,160
been able to model in the past.

545
00:28:45,160 --> 00:28:47,560
So secular tailwinds are really important.

546
00:28:47,560 --> 00:28:52,640
The third thing is a history of intelligent capital allocation.

547
00:28:52,640 --> 00:28:54,560
Ideally, we have great capital allocators

548
00:28:54,560 --> 00:28:58,360
that are just fantastically reinvesting our capital,

549
00:28:58,360 --> 00:29:01,760
buying back stock when they should.

550
00:29:01,760 --> 00:29:04,120
But that's been an important part, I think,

551
00:29:04,120 --> 00:29:08,200
of the ones that really have run the cash register over time.

552
00:29:08,200 --> 00:29:09,520
And then we look at those.

553
00:29:09,520 --> 00:29:11,120
That's called our Grove of Titans.

554
00:29:11,120 --> 00:29:14,880
Here's a list of, call it, 120 to 150 companies globally

555
00:29:14,880 --> 00:29:19,720
that kind of meet a criteria of having those three attributes.

556
00:29:19,720 --> 00:29:22,640
And then what we do is we really build a 10-year free cash flow

557
00:29:22,640 --> 00:29:27,160
model to understand, what's the growth of free cash flow?

558
00:29:27,160 --> 00:29:28,800
Price for paying today?

559
00:29:28,800 --> 00:29:32,440
Reasonable terminal multiple based on that moat where we think

560
00:29:32,440 --> 00:29:33,280
it'll be.

561
00:29:33,280 --> 00:29:34,440
And that's our IRR.

562
00:29:34,440 --> 00:29:38,720
So the internal conversation that we have is, here's our Grove

563
00:29:38,720 --> 00:29:40,280
of Titans, we call it.

564
00:29:40,280 --> 00:29:44,240
Here are the IRRs, we think, over a 10-year duration.

565
00:29:44,240 --> 00:29:48,240
It kind of-- the process is giving us ideas for things to do.

566
00:29:48,240 --> 00:29:51,640
Here's something that at 19% IRR today,

567
00:29:51,640 --> 00:29:54,200
here we've identified the clouds that we think

568
00:29:54,200 --> 00:29:57,920
are giving us the opportunity.

569
00:29:57,920 --> 00:30:00,560
And let's focus on doing our work to see those--

570
00:30:00,560 --> 00:30:04,520
could those clouds disperse over short term, medium term,

571
00:30:04,520 --> 00:30:08,680
or uncertain, maybe too difficult to figure out?

572
00:30:08,680 --> 00:30:13,560
And what we're trying to do is, buy 15% or better IRRs,

573
00:30:13,560 --> 00:30:16,440
continue to build that portfolio around that.

574
00:30:16,440 --> 00:30:18,320
We think we do that that'll generate really

575
00:30:18,320 --> 00:30:20,720
good long-term returns.

576
00:30:20,720 --> 00:30:24,160
How do you think of capital allocation across geography?

577
00:30:24,160 --> 00:30:27,480
How does that factor into your decision-making process?

578
00:30:27,480 --> 00:30:30,200
Yeah, you know, I'll just rattle through our six principles

579
00:30:30,200 --> 00:30:31,800
because they're really important.

580
00:30:31,800 --> 00:30:35,280
Research focused, exceptional businesses,

581
00:30:35,280 --> 00:30:38,160
disciplined and patient around value,

582
00:30:38,160 --> 00:30:41,280
long-term orientation, concentrated.

583
00:30:41,280 --> 00:30:43,680
And then the last one, which you just spoke to, is

584
00:30:43,680 --> 00:30:46,040
to operate unconstrained.

585
00:30:46,040 --> 00:30:47,280
Unconstrained.

586
00:30:47,280 --> 00:30:52,280
And that means geography, industry, market cap.

587
00:30:52,280 --> 00:30:56,760
And so our Grove of Titans universe is very global.

588
00:30:56,760 --> 00:31:00,560
I want to learn more about even more non-US businesses

589
00:31:00,560 --> 00:31:02,480
in the future than we even know today.

590
00:31:02,480 --> 00:31:04,320
So we know there's a lot of doubt there

591
00:31:04,320 --> 00:31:06,680
they're hiding in plain sight that we haven't discovered.

592
00:31:06,680 --> 00:31:11,560
So let this be an echolocation call to some of your listeners

593
00:31:11,560 --> 00:31:14,520
that can mention a few to us.

594
00:31:14,520 --> 00:31:19,800
But we're always trying to add to our Grove and broaden

595
00:31:19,800 --> 00:31:20,880
our understanding.

596
00:31:20,880 --> 00:31:24,960
So I admire Sir John for how he thought

597
00:31:24,960 --> 00:31:28,920
about global investing and how important it was

598
00:31:28,920 --> 00:31:31,080
because he would be in countries that no one was

599
00:31:31,080 --> 00:31:32,360
even thinking about.

600
00:31:32,360 --> 00:31:34,800
And all of a sudden they look back and like, oh yeah, that was obvious.

601
00:31:34,800 --> 00:31:36,080
And even Warren's done this.

602
00:31:36,080 --> 00:31:38,880
He's in Japan doing these trading houses.

603
00:31:38,880 --> 00:31:43,200
And he's South Korea six times earnings.

604
00:31:43,200 --> 00:31:46,440
So our mandate in our core principle

605
00:31:46,440 --> 00:31:48,880
is to operate unconstrained geographically.

606
00:31:48,880 --> 00:31:51,840
And we've really attempted to do that.

607
00:31:51,840 --> 00:31:53,080
Yeah, I think it's so smart.

608
00:31:53,080 --> 00:31:54,600
Uncle John used to always say,

609
00:31:54,600 --> 00:31:58,480
have the largest universe of stocks available for your selection.

610
00:31:58,480 --> 00:32:01,080
It only makes, it's only common sense to do that.

611
00:32:01,080 --> 00:32:02,320
Absolutely.

612
00:32:02,320 --> 00:32:09,520
I mean, we are, to live in the US and we have an incredible pool

613
00:32:09,520 --> 00:32:11,560
of businesses here.

614
00:32:11,560 --> 00:32:19,040
And so we certainly have oriented to those over time.

615
00:32:19,040 --> 00:32:23,200
And but it's a very open-minded to wherever

616
00:32:23,200 --> 00:32:24,200
the geography might be.

617
00:32:24,200 --> 00:32:25,200
Right.

618
00:32:25,200 --> 00:32:28,680
There are more neglected companies outside of the US.

619
00:32:28,680 --> 00:32:32,920
It's also really easy to get information these days on companies.

620
00:32:32,920 --> 00:32:36,480
When Uncle John, it always amazes me that when he operated

621
00:32:36,480 --> 00:32:39,800
and he was investing internationally,

622
00:32:39,800 --> 00:32:43,000
that information was really hard to come by.

623
00:32:43,000 --> 00:32:47,600
So he really lived by what he called the doctrine of the extra ounce.

624
00:32:47,600 --> 00:32:51,880
It's the little bit of extra work you do

625
00:32:51,880 --> 00:32:55,920
over the guy next to you that's going to separate you from the crowd.

626
00:32:55,920 --> 00:33:00,200
And so the extra report, the extra time

627
00:33:00,200 --> 00:33:04,400
you took understanding the accounting principles in Japan

628
00:33:04,400 --> 00:33:07,760
in the 1960s, that was going to accrue to the benefit

629
00:33:07,760 --> 00:33:08,600
of your investors.

630
00:33:08,600 --> 00:33:09,600
So.

631
00:33:09,600 --> 00:33:10,880
And go to the source.

632
00:33:10,880 --> 00:33:13,720
I mean, one of the things I think that you reference

633
00:33:13,720 --> 00:33:16,120
is the willingness to get on an airplane

634
00:33:16,120 --> 00:33:18,880
and going out and touching the medium, right?

635
00:33:18,880 --> 00:33:20,880
Like, as investors, it's easier for us to sit here,

636
00:33:20,880 --> 00:33:22,680
read the annual report,

637
00:33:22,680 --> 00:33:24,360
and think we know everything there is about a business,

638
00:33:24,360 --> 00:33:28,080
but actually go out and meet with these businesses,

639
00:33:28,080 --> 00:33:31,360
understand them, meet their customers.

640
00:33:31,360 --> 00:33:34,800
And it build a tangible, a real tangible understanding

641
00:33:34,800 --> 00:33:37,840
of what this business is, what's the culture of it?

642
00:33:37,840 --> 00:33:41,040
And that helps us.

643
00:33:41,040 --> 00:33:47,000
One of the things that I've learned over two decades

644
00:33:47,000 --> 00:33:49,360
doing this is you can't outsource judgment.

645
00:33:49,360 --> 00:33:52,840
To have judgment is to touch the source material.

646
00:33:52,840 --> 00:33:55,240
So we actually have an active process where

647
00:33:55,240 --> 00:33:58,480
if we're coming up and getting something close to a finish

648
00:33:58,480 --> 00:34:02,920
line to be included in kind of our sub 10 portfolio,

649
00:34:02,920 --> 00:34:05,480
we don't want to be convincing another team member.

650
00:34:05,480 --> 00:34:08,440
We want them to have read the source material

651
00:34:08,440 --> 00:34:12,240
as we go along so that we all have a working understanding

652
00:34:12,240 --> 00:34:14,560
of the key attributes of the business,

653
00:34:14,560 --> 00:34:17,080
and not just one person kind of carrying it

654
00:34:17,080 --> 00:34:19,360
and convincing others.

655
00:34:19,360 --> 00:34:21,200
So it's part of the way that we operate.

656
00:34:21,200 --> 00:34:22,680
I completely agree with you.

657
00:34:22,680 --> 00:34:24,800
That's why we don't actually employ

658
00:34:24,800 --> 00:34:26,920
analysts at Templeton and Phillips,

659
00:34:26,920 --> 00:34:31,080
because we found that it really didn't save us any time,

660
00:34:31,080 --> 00:34:36,200
because we feel that our edge is on the behavioral side.

661
00:34:36,200 --> 00:34:39,240
And ultimately, when the rubber hits the road,

662
00:34:39,240 --> 00:34:42,080
we have to have conviction in the position.

663
00:34:42,080 --> 00:34:45,360
And the only way for us to have the conviction in the position

664
00:34:45,360 --> 00:34:48,600
is to have done the work ourselves.

665
00:34:48,600 --> 00:34:51,440
So it is-- I was going to ask you, this

666
00:34:51,440 --> 00:34:54,760
is a little bit off topic, but since you're a professor

667
00:34:54,760 --> 00:34:57,720
at Columbia, and you're dealing with students every day,

668
00:34:57,720 --> 00:35:00,040
I just had a little debate with a group

669
00:35:00,040 --> 00:35:02,640
of professional investors at--

670
00:35:02,640 --> 00:35:04,720
we were at the Berkshire Hathaway annual meeting

671
00:35:04,720 --> 00:35:06,160
at a barbecue.

672
00:35:06,160 --> 00:35:09,280
And the question was, would you advise a young person

673
00:35:09,280 --> 00:35:12,320
to go into the investing field today,

674
00:35:12,320 --> 00:35:14,080
or is it just too competitive?

675
00:35:14,080 --> 00:35:18,200
And my response was, I think Sir John would have definitely

676
00:35:18,200 --> 00:35:19,720
said, do not do it.

677
00:35:19,720 --> 00:35:21,440
Do not go into investing.

678
00:35:21,440 --> 00:35:23,080
It's too competitive.

679
00:35:23,080 --> 00:35:27,920
Find a different industry where there's less competition.

680
00:35:27,920 --> 00:35:29,920
And there was a little back and forth

681
00:35:29,920 --> 00:35:31,320
with this group of investors.

682
00:35:31,320 --> 00:35:37,720
And I'm curious, do you think that there are just too many students

683
00:35:37,720 --> 00:35:42,760
and managers studying, investing, following Warren Buffett,

684
00:35:42,760 --> 00:35:46,600
going to the annual meeting, reading all the 10Ks and 10Qs?

685
00:35:46,600 --> 00:35:51,400
I mean, is there an edge there that's worth pursuing?

686
00:35:51,400 --> 00:35:53,200
Absolutely, there is.

687
00:35:53,200 --> 00:36:00,240
This is what a beautiful art that we can enter into this business.

688
00:36:00,240 --> 00:36:03,160
Our universe is public equities.

689
00:36:03,160 --> 00:36:05,720
We're trying to find a handful of businesses

690
00:36:05,720 --> 00:36:07,520
that we can really own for a long time

691
00:36:07,520 --> 00:36:09,240
and earn superior returns.

692
00:36:09,240 --> 00:36:11,280
Alpha over benchmark.

693
00:36:11,280 --> 00:36:12,240
That's substantial.

694
00:36:12,240 --> 00:36:16,200
And that's a very--

695
00:36:16,200 --> 00:36:18,000
I think there's a lot of really good students

696
00:36:18,000 --> 00:36:21,120
that can actually have the temperament to be really good at that.

697
00:36:21,120 --> 00:36:22,320
But I think if you're going to do it,

698
00:36:22,320 --> 00:36:25,240
and you're going to be part of a large institution

699
00:36:25,240 --> 00:36:28,840
and so forth, that path may not be for everyone.

700
00:36:28,840 --> 00:36:33,400
And so it all depends on the student.

701
00:36:33,400 --> 00:36:36,640
But I meet students that are on fire about doing this.

702
00:36:36,640 --> 00:36:39,280
And I know it's going to be the perfect thing for them.

703
00:36:39,280 --> 00:36:41,120
But for others, they're not on fire about it,

704
00:36:41,120 --> 00:36:42,920
but they're doing it because they're just checking boxes.

705
00:36:42,920 --> 00:36:46,600
They're probably not going to be exceptional at it.

706
00:36:46,600 --> 00:36:48,120
So it all depends.

707
00:36:48,120 --> 00:36:51,160
One thing I would say to some students

708
00:36:51,160 --> 00:36:53,400
who is if they have--

709
00:36:53,400 --> 00:36:55,760
if they're thinking about a path of operating a business

710
00:36:55,760 --> 00:36:59,360
versus being an investor, go operate a business.

711
00:36:59,360 --> 00:37:02,360
Like, really understand how to run a business.

712
00:37:02,360 --> 00:37:03,920
You know, set up a lemonade stand.

713
00:37:03,920 --> 00:37:05,200
Like, what's this look like?

714
00:37:05,200 --> 00:37:08,440
What's a-- like, receivables, payables,

715
00:37:08,440 --> 00:37:10,920
like, build your own financial statements.

716
00:37:10,920 --> 00:37:15,640
All this stuff is really going to make you a much better investor.

717
00:37:15,640 --> 00:37:20,880
So, that to me is something that I always would recommend

718
00:37:20,880 --> 00:37:22,680
and then come back.

719
00:37:22,680 --> 00:37:25,760
And you're going to have to be much better for it.

720
00:37:25,760 --> 00:37:26,640
Completely.

721
00:37:26,640 --> 00:37:28,880
I definitely agree with that.

722
00:37:28,880 --> 00:37:35,320
I actually started a company in, let's see, maybe 2015,

723
00:37:35,320 --> 00:37:38,200
because I needed to refresh myself.

724
00:37:38,200 --> 00:37:41,280
And it's the e-commerce business that's still open,

725
00:37:41,280 --> 00:37:42,240
still managing it.

726
00:37:42,240 --> 00:37:44,280
But I just needed to get back.

727
00:37:44,280 --> 00:37:47,400
Like, I needed-- I know I'm growing an investment business.

728
00:37:47,400 --> 00:37:49,560
And yes, I'm definitely running in a business

729
00:37:49,560 --> 00:37:52,080
and have employees and understand that.

730
00:37:52,080 --> 00:37:56,440
But I needed something else.

731
00:37:56,440 --> 00:38:00,440
And it was really refreshing to conceptualize a business

732
00:38:00,440 --> 00:38:02,760
from, you know, infancy stage.

733
00:38:02,760 --> 00:38:06,000
Like, here's the business plan, the business model.

734
00:38:06,000 --> 00:38:07,160
Here's the logo.

735
00:38:07,160 --> 00:38:12,000
Here's-- I mean, that was really reinvigorating for me

736
00:38:12,000 --> 00:38:16,840
to get back to just core business principles.

737
00:38:16,840 --> 00:38:19,840
And I think it only makes you a greater investor

738
00:38:19,840 --> 00:38:22,240
to understand business through the aspect,

739
00:38:22,240 --> 00:38:24,640
through the eyes of an operator.

740
00:38:24,640 --> 00:38:26,720
One of the things that, as a family,

741
00:38:26,720 --> 00:38:32,680
we've gotten into hospitality over the last 10 years.

742
00:38:32,680 --> 00:38:36,040
And it was so eye-opening to me, because of the--

743
00:38:36,040 --> 00:38:38,920
you know, go to a hotel, you kind of know

744
00:38:38,920 --> 00:38:42,720
what it feels like when you're in the presence of quality.

745
00:38:42,720 --> 00:38:47,720
But to try to operate a business at that leading edge

746
00:38:47,720 --> 00:38:50,200
of quality, you've been at that.

747
00:38:50,200 --> 00:38:52,760
And it's such a fine line.

748
00:38:52,760 --> 00:38:54,360
It's all the details.

749
00:38:54,360 --> 00:38:56,240
It's getting everything right.

750
00:38:56,240 --> 00:38:57,720
Not just a handful of things right.

751
00:38:57,720 --> 00:38:59,040
Everything has to be right.

752
00:38:59,040 --> 00:39:04,880
So I think being in hospitality and thinking

753
00:39:04,880 --> 00:39:07,360
about quality investing the way we do is there's

754
00:39:07,360 --> 00:39:09,560
so many parallels to that.

755
00:39:09,560 --> 00:39:09,880
Yeah.

756
00:39:09,880 --> 00:39:14,240
Isn't it beautiful, though, when you see even the smallest job

757
00:39:14,240 --> 00:39:17,520
perfectly executed in all the detail?

758
00:39:17,520 --> 00:39:22,640
I mean, it's such a beautiful quality to experience.

759
00:39:22,640 --> 00:39:25,520
Yeah, and I think the Japanese aesthetic really

760
00:39:25,520 --> 00:39:26,120
got this right.

761
00:39:26,120 --> 00:39:28,600
Like, if they were in a tea ceremony,

762
00:39:28,600 --> 00:39:30,600
if the tea ceremony wasn't just about drinking tea,

763
00:39:30,600 --> 00:39:32,960
it was, how do you prepare the tea?

764
00:39:32,960 --> 00:39:36,880
How do you-- from the minute, how does it feel?

765
00:39:36,880 --> 00:39:38,280
What does it smell like?

766
00:39:38,280 --> 00:39:40,320
Everything was important.

767
00:39:40,320 --> 00:39:42,640
So it was almost like a little fractal of how

768
00:39:42,640 --> 00:39:45,880
you should live your life.

769
00:39:45,880 --> 00:39:50,200
So yeah, I think that that's one of my perennial speakers

770
00:39:50,200 --> 00:39:53,960
that I-- in the class is Nick Sleep.

771
00:39:53,960 --> 00:39:58,080
And Nick has written some beautiful investor letters.

772
00:39:58,080 --> 00:39:59,960
But we often talk about quality.

773
00:39:59,960 --> 00:40:03,960
And we share a love for Pirsig's work, Zen and Lila.

774
00:40:03,960 --> 00:40:07,920
And I don't think anyone has talked about quality

775
00:40:07,920 --> 00:40:10,960
at the level that Pirsig has, because it's

776
00:40:10,960 --> 00:40:14,720
actually an ineffable state that we're talking to,

777
00:40:14,720 --> 00:40:16,160
but it's so special.

778
00:40:16,160 --> 00:40:21,160
And I think life is such where a lot of us that naturally

779
00:40:21,160 --> 00:40:27,240
congregate in these conversations are just so moved by it.

780
00:40:27,240 --> 00:40:28,080
Absolutely.

781
00:40:28,080 --> 00:40:31,080
Now, the thing that you've kind of provoked me

782
00:40:31,080 --> 00:40:33,640
into thinking more about during this discussion

783
00:40:33,640 --> 00:40:39,880
was operating a business and favoring quality

784
00:40:39,880 --> 00:40:43,640
and some of these kind of value systems, so to speak,

785
00:40:43,640 --> 00:40:46,720
speaks towards some intangibles as an investor

786
00:40:46,720 --> 00:40:48,400
that you might not pick up on if you're just

787
00:40:48,400 --> 00:40:49,640
studying through the classroom, which

788
00:40:49,640 --> 00:40:52,480
is the culture of a business.

789
00:40:52,480 --> 00:40:55,080
And then not only the culture of a business,

790
00:40:55,080 --> 00:40:59,200
but the alignment of principles as an investor

791
00:40:59,200 --> 00:41:02,840
with both your clients, your belief system,

792
00:41:02,840 --> 00:41:05,280
and the companies you invest in.

793
00:41:05,280 --> 00:41:07,600
And if you go to a place like the Berkshire

794
00:41:07,600 --> 00:41:12,000
Hathaway Annual Meeting or the Fairfax Annual Meeting,

795
00:41:12,000 --> 00:41:15,240
or Markel, any of these other kind of congregations

796
00:41:15,240 --> 00:41:18,760
of value investors, you see this kind of eerie alignment

797
00:41:18,760 --> 00:41:21,560
of all these people like you're having a great time.

798
00:41:21,560 --> 00:41:23,320
You're hitting it off with all of them.

799
00:41:23,320 --> 00:41:25,640
They're all wonderful and nice.

800
00:41:25,640 --> 00:41:28,920
And it's interesting when you see these kind of concentrations

801
00:41:28,920 --> 00:41:29,880
of that.

802
00:41:29,880 --> 00:41:32,000
And I think as an operator of a business,

803
00:41:32,000 --> 00:41:34,760
as an investor, you can toggle and maybe

804
00:41:34,760 --> 00:41:38,680
have the ability to see that in a potential investment.

805
00:41:38,680 --> 00:41:43,080
And if you don't see it, conversely, it could be a warning sign.

806
00:41:43,080 --> 00:41:47,200
It's beautifully said Scott, I was at the Berkshire Annual Meeting

807
00:41:47,200 --> 00:41:48,200
as well.

808
00:41:48,200 --> 00:41:49,240
I just closed my eyes.

809
00:41:49,240 --> 00:41:51,320
And you're in the presence of these 40,000 people

810
00:41:51,320 --> 00:41:52,000
in the auditorium.

811
00:41:52,000 --> 00:41:54,480
And it's like, why are we all here?

812
00:41:54,480 --> 00:41:58,720
Is it really to hear from Warren & Charlie, sure?

813
00:41:58,720 --> 00:42:02,040
But its that feeling that we're part of something bigger.

814
00:42:02,040 --> 00:42:10,280
I wrote a section of this year-end letter.

815
00:42:10,280 --> 00:42:12,760
And I called it pattern recognition.

816
00:42:12,760 --> 00:42:16,080
Silent the eyes, listen, they see.

817
00:42:16,080 --> 00:42:17,800
It's an anagram.

818
00:42:17,800 --> 00:42:19,720
So if you actually play Listen and Silent,

819
00:42:19,720 --> 00:42:25,040
and so you silent the eyes, listen, they see.

820
00:42:25,040 --> 00:42:28,160
It talks about hearing, listening, deep listening.

821
00:42:28,160 --> 00:42:31,200
And so one of the things we do with our businesses

822
00:42:31,200 --> 00:42:33,200
that we're investing is we listen deeply

823
00:42:33,200 --> 00:42:34,760
to what management says.

824
00:42:34,760 --> 00:42:38,440
And do their actions meet their words?

825
00:42:38,440 --> 00:42:39,840
And that's subtle, right?

826
00:42:39,840 --> 00:42:43,120
And you pick it up so subtly.

827
00:42:43,120 --> 00:42:46,880
But the more you listen, you can see the little oddities

828
00:42:46,880 --> 00:42:48,080
that, oh, that doesn't make sense.

829
00:42:48,080 --> 00:42:50,520
That doesn't add up.

830
00:42:50,520 --> 00:42:53,400
You don't get that just by reading one annual report.

831
00:42:53,400 --> 00:42:58,120
It's just a accumulation of that.

832
00:42:58,120 --> 00:43:00,000
And that speaks to the culture, right?

833
00:43:00,000 --> 00:43:04,480
Like I mentioned the Mendelson's and everything

834
00:43:04,480 --> 00:43:10,760
that they say is demonstrated in their culture.

835
00:43:10,760 --> 00:43:13,840
It's in every interaction that you have with them

836
00:43:13,840 --> 00:43:15,800
and the business.

837
00:43:15,800 --> 00:43:20,480
So it's that consistency and the constancy that builds trust,

838
00:43:20,480 --> 00:43:20,720
right?

839
00:43:20,720 --> 00:43:23,360
And the reputation that is deserved.

840
00:43:23,360 --> 00:43:24,160
Yeah.

841
00:43:24,160 --> 00:43:25,880
I often comment on that.

842
00:43:25,880 --> 00:43:29,120
And I'm sure my listeners have heard this many times before.

843
00:43:29,120 --> 00:43:33,000
But I did not place--

844
00:43:33,000 --> 00:43:36,120
I placed value on culture before going

845
00:43:36,120 --> 00:43:37,600
on to the Fairfax Board.

846
00:43:37,600 --> 00:43:41,880
But I just didn't understand how powerful it was.

847
00:43:41,880 --> 00:43:44,200
And after being on the Fairfax Board

848
00:43:44,200 --> 00:43:49,840
and seeing the culture expressed in every detail of the business,

849
00:43:49,840 --> 00:43:52,400
I mean, it's in every little detail

850
00:43:52,400 --> 00:43:59,520
how really powerful that is, how it does create a culture of trust.

851
00:43:59,520 --> 00:44:03,520
And I mean, Fairfax is "fair and friendly acquisitions".

852
00:44:03,520 --> 00:44:09,200
So I also have heard you talk a lot about when you're doing business.

853
00:44:09,200 --> 00:44:12,000
It has to be a win-win for everybody,

854
00:44:12,000 --> 00:44:16,360
for the business to be sustainable over the long term.

855
00:44:16,360 --> 00:44:18,360
And that's the way I think about Fairfax.

856
00:44:18,360 --> 00:44:21,240
It's really changed my perception on business

857
00:44:21,240 --> 00:44:25,120
since joining that board and seeing the power of culture

858
00:44:25,120 --> 00:44:26,720
when it's done right.

859
00:44:26,720 --> 00:44:28,040
When it's done right.

860
00:44:28,040 --> 00:44:31,080
And I mentioned the eight layers of competitive advantage.

861
00:44:31,080 --> 00:44:34,600
The seven are those that we can actually point to.

862
00:44:34,600 --> 00:44:36,360
The eighth is culture.

863
00:44:36,360 --> 00:44:37,680
And it's a culture of quality, right?

864
00:44:37,680 --> 00:44:39,840
Its that areté, the virtue and excellence

865
00:44:39,840 --> 00:44:43,800
at the leading edge.

866
00:44:43,800 --> 00:44:45,000
I never start with it there.

867
00:44:45,000 --> 00:44:46,680
It's never like, oh, that's a good culture.

868
00:44:46,680 --> 00:44:47,600
It's like, no, no.

869
00:44:47,600 --> 00:44:51,440
You have to have the other things to then build the culture.

870
00:44:51,440 --> 00:44:55,360
And the culture is because you have the other layers of competitive advantage

871
00:44:55,360 --> 00:45:01,160
that allow you to be win-win, allow you to operate over a long duration

872
00:45:01,160 --> 00:45:06,040
to protect your employees, to protect your ecosystem.

873
00:45:06,040 --> 00:45:13,360
So culture, for me, is always that last piece that manifests later

874
00:45:13,360 --> 00:45:18,680
in the understanding about the system, about the business.

875
00:45:18,680 --> 00:45:21,920
Because with Fairfax, they had to do a lot of other things right

876
00:45:21,920 --> 00:45:24,320
So they could build that culture of excellence,

877
00:45:24,320 --> 00:45:27,680
which then became even stronger.

878
00:45:27,680 --> 00:45:31,800
But Chris, how do you teach your students to measure that?

879
00:45:31,800 --> 00:45:32,680
It's hard.

880
00:45:32,680 --> 00:45:35,440
And that's why Peter Kaufman is one of--

881
00:45:35,440 --> 00:45:39,280
also one of my annual speakers.

882
00:45:39,280 --> 00:45:41,000
He's like the culture guru.

883
00:45:41,000 --> 00:45:42,000
Like I bring him in.

884
00:45:42,000 --> 00:45:43,880
Sometimes we'll go and actually visit.

885
00:45:43,880 --> 00:45:49,520
And I've taken the class out to California for, I think, five years pre-COVID.

886
00:45:49,520 --> 00:45:51,560
And we'll spend the whole day with Peter.

887
00:45:51,560 --> 00:45:58,000
And I think you leave that experience being

888
00:45:58,000 --> 00:46:02,840
around a great culture to be able to understand a culture.

889
00:46:02,840 --> 00:46:05,880
So I think it's that part of it.

890
00:46:05,880 --> 00:46:07,960
It's like once you have worked with Fairfax, we're

891
00:46:07,960 --> 00:46:14,200
long enough, you're like, OK, now the bar is here on what I think culture is.

892
00:46:14,200 --> 00:46:18,560
And so I think just being around good cultures and understanding the contrast

893
00:46:18,560 --> 00:46:24,960
is probably how I would teach it to others, because it's how I've learned it.

894
00:46:24,960 --> 00:46:29,880
I think being around it, you also learn to see it in other businesses.

895
00:46:29,880 --> 00:46:31,480
You can spot it easier.

896
00:46:31,480 --> 00:46:37,360
And it's really the consistency and the messaging and the people that you meet

897
00:46:37,360 --> 00:46:40,840
that are in the network of that business.

898
00:46:40,840 --> 00:46:43,160
It's all so important.

899
00:46:43,160 --> 00:46:44,280
Being kind, right?

900
00:46:44,280 --> 00:46:51,920
Like being in this expression, I always say to myself, really, it's be constant, be kind.

901
00:46:51,920 --> 00:46:58,680
There's a kindness, I think.  I think, of long-grade cultures on how they treat each other

902
00:46:58,680 --> 00:47:03,280
and how they treat every counterpart of that they have.

903
00:47:03,280 --> 00:47:06,120
I think a bit more of a gentleness, you know?

904
00:47:06,120 --> 00:47:08,280
Gentleness, I love that word.

905
00:47:08,280 --> 00:47:09,280
Yeah, grace.

906
00:47:09,280 --> 00:47:10,280
Yeah, grace.

907
00:47:10,280 --> 00:47:12,800
So you can make hard decisions.

908
00:47:12,800 --> 00:47:17,520
You can do hard things, but do it with a gentle hand.

909
00:47:17,520 --> 00:47:23,280
It's the way I think of it, almost like parenting, although I'm not always gentle.

910
00:47:23,280 --> 00:47:26,680
My kids sometimes frustrate me.

911
00:47:26,680 --> 00:47:30,320
Well, tell me, how are you seeing the world right now?

912
00:47:30,320 --> 00:47:32,120
Where are the investment opportunities?

913
00:47:32,120 --> 00:47:33,520
Are you excited?

914
00:47:33,520 --> 00:47:36,160
Are you making a lot of changes to your portfolio?

915
00:47:36,160 --> 00:47:37,160
Are you not?

916
00:47:37,160 --> 00:47:40,000
Where do you think, what is keeping you up at night?

917
00:47:40,000 --> 00:47:42,240
Thank you, Lauren.

918
00:47:42,240 --> 00:47:45,920
Yeah, so I always go back to the clouds.

919
00:47:45,920 --> 00:47:52,920
You know, if you were to task me with where I thought valuations were across the universe,

920
00:47:52,920 --> 00:47:56,640
you know, one to ten, I think we're somewhere kind of

921
00:47:56,640 --> 00:48:00,360
Ten being kind of most attractive.

922
00:48:00,360 --> 00:48:02,520
We're probably like a six across the board.

923
00:48:02,520 --> 00:48:10,520
Like, you know, I'm seeing a lot of 12% IRRs in the universe, maybe even tens and elevens.

924
00:48:10,520 --> 00:48:17,040
We have a handful of things I think I have clouds that we think will disperse over, I think

925
00:48:17,040 --> 00:48:22,840
a time horizon that is acceptable to us, that are kind of in the upper teens.

926
00:48:22,840 --> 00:48:24,840
So that gets us excited.

927
00:48:24,840 --> 00:48:29,320
Like I said, we own currently eight companies.

928
00:48:29,320 --> 00:48:35,640
And of the eight businesses, we feel pretty strongly about the return profile of those over

929
00:48:35,640 --> 00:48:43,800
a ten year kind of underwriting period, kind of in that high kind of teens.

930
00:48:43,800 --> 00:48:46,680
But I think the overall market is not to be excited about.

931
00:48:46,680 --> 00:48:49,440
That's how I'm seeing it.

932
00:48:49,440 --> 00:48:53,960
We saw kind of a nice recovery this year.

933
00:48:53,960 --> 00:49:01,560
I think if we have persistent high inflation kind of upper fours, that's hard to get rid of.

934
00:49:01,560 --> 00:49:05,680
That that on a compounding basis can be really a challenge.

935
00:49:05,680 --> 00:49:07,920
It's a challenge to run businesses in that environment.

936
00:49:07,920 --> 00:49:09,840
We're not used to doing that.

937
00:49:09,840 --> 00:49:13,800
So I think that that's probably not in consensus thinking.

938
00:49:13,800 --> 00:49:19,560
So we're kind of eyes wide open to the fact that, you know, there's a fair amount of quiet

939
00:49:19,560 --> 00:49:20,560
to it right now.

940
00:49:20,560 --> 00:49:25,240
And the challenge that gets me like, okay, there could be some volatility ahead, which we

941
00:49:25,240 --> 00:49:27,600
get excited about.

942
00:49:27,600 --> 00:49:32,160
It's in those periods of greatest volatility that we think we could add the most value with

943
00:49:32,160 --> 00:49:35,440
a kind of prepared mind.

944
00:49:35,440 --> 00:49:40,000
So you know, we're looking for micro clouds, things that we think are creating a certain,

945
00:49:40,000 --> 00:49:43,520
so a few of the businesses are working on today.

946
00:49:43,520 --> 00:49:49,880
One just kind of made it through the portfolio, like really identifiable micro clouds associated

947
00:49:49,880 --> 00:49:53,880
on the individual business side.

948
00:49:53,880 --> 00:50:00,440
And certainly any micro volatility will help us.

949
00:50:00,440 --> 00:50:03,240
I'm thinking a lot about AI.

950
00:50:03,240 --> 00:50:07,680
You know, AI has been certainly very topical this year.

951
00:50:07,680 --> 00:50:15,280
The LLM inflection that's happened over the last six months is very monumental.

952
00:50:15,280 --> 00:50:25,160
And I think we're in a period of a known, unknown there that we need to have the right conversation

953
00:50:25,160 --> 00:50:29,000
around the right thinking we've been active in those conversations.

954
00:50:29,000 --> 00:50:33,000
I think for the last decade, with I think some of the leaders in this field.

955
00:50:33,000 --> 00:50:41,680
And we're trying to, you know, I think when you look at AI in these LLMs, they mirror humanity.

956
00:50:41,680 --> 00:50:45,240
They mirror what it is, all of humanity.

957
00:50:45,240 --> 00:50:48,760
So you could say, you know, it's the whole bell-shape curve.

958
00:50:48,760 --> 00:50:54,240
And I think there's a way to refract the best parts of humanity as we continue to build

959
00:50:54,240 --> 00:50:56,800
up AI where it's more heart centered.

960
00:50:56,800 --> 00:51:03,320
It's more, it can be tweaked for win-win, critical thinking.

961
00:51:03,320 --> 00:51:07,600
Where second and third order effects are not negative but positive.

962
00:51:07,600 --> 00:51:12,320
And so social media, the issue we had, I think, in continued to do with social media is

963
00:51:12,320 --> 00:51:15,320
it amplifies those tails, right?

964
00:51:15,320 --> 00:51:17,440
It's the whole mirror and then you're amplifying the tails.

965
00:51:17,440 --> 00:51:23,960
I think as we build AI, we could build it in a way that it doesn't amplify the tails,

966
00:51:23,960 --> 00:51:29,800
but it minimizes the negative tails and enhances the positive tails.

967
00:51:29,800 --> 00:51:35,320
And so that's something that's hopeful thinking, you know, the conversations that I'm interested

968
00:51:35,320 --> 00:51:41,680
in having with the leaders in this field are, is just, you know, how do we do it?

969
00:51:41,680 --> 00:51:48,680
You know, how do we, you know, architect safety measures that are going to be really important

970
00:51:48,680 --> 00:51:49,680
at this stage?

971
00:51:49,680 --> 00:51:57,240
Yeah, the AI cloud, I'm so glad you brought this up, Chris, because it's such a, I think it

972
00:51:57,240 --> 00:51:59,120
is transformational, obviously.

973
00:51:59,120 --> 00:52:04,000
I think the people that are saying that this is going to change everything or spot on.

974
00:52:04,000 --> 00:52:11,120
The questions are how and where and when, but one of the things that comes up as a value

975
00:52:11,120 --> 00:52:17,560
investor, let's say, we all know kind of the linear companies that have already participated

976
00:52:17,560 --> 00:52:24,080
in this, this fervor, the NVIDIAs and some of the more heavily involved, but more derivative

977
00:52:24,080 --> 00:52:27,720
plays like the Alphabets and the Amazon's.

978
00:52:27,720 --> 00:52:33,600
But the question really as a value investor who may look at an NVIDIA and say, well,

979
00:52:33,600 --> 00:52:38,680
that's great, but we can't invest there because it's, you know, it's already taken off or

980
00:52:38,680 --> 00:52:40,360
what not.

981
00:52:40,360 --> 00:52:47,840
There seems to be a discussion that is yet to kind of coalesce or materialize between,

982
00:52:47,840 --> 00:52:52,080
and I'm drawing on an interview that you gave to Graham and Doddsville, who I think, where

983
00:52:52,080 --> 00:52:55,000
you talk about the three types of value plays.

984
00:52:55,000 --> 00:52:58,800
There's the compounders, the transformations and the workouts.

985
00:52:58,800 --> 00:53:04,780
And those transformations are very interesting from a value investing standpoint because

986
00:53:04,780 --> 00:53:11,760
you really do look at across this kind of spectrum of businesses are still figuring out the

987
00:53:11,760 --> 00:53:17,420
cloud, the technology of the cloud, then AI on top of that and how that's going to unlock

988
00:53:17,420 --> 00:53:23,200
value, kind of pierce that entropy you talk about, you know, unleash value to their customers.

989
00:53:23,200 --> 00:53:27,800
And then you've got these companies that are low multiples and may expand their margins

990
00:53:27,800 --> 00:53:31,320
pretty dramatically in some cases if they can figure this out.

991
00:53:31,320 --> 00:53:36,080
And that to me is kind of this lurking value play that no one's really talking about and

992
00:53:36,080 --> 00:53:41,880
it would have obviously important ramifications for investors in the stock market too, over

993
00:53:41,880 --> 00:53:42,880
time.

994
00:53:42,880 --> 00:53:47,520
So I wonder if you've have any thoughts on that or poked around up that at all.

995
00:53:47,520 --> 00:53:51,040
And yes, on the transformation category.

996
00:53:51,040 --> 00:53:55,040
When I think about that, I think of these companies that have kind of even been kind

997
00:53:55,040 --> 00:53:58,880
of known as being maybe average performers.

998
00:53:58,880 --> 00:54:04,120
When I think of the railroads that may be in a return on invested capital of like 10%, 12%,

999
00:54:04,120 --> 00:54:09,920
and then all of a sudden go this through this inflection where they're actually high returns on invested capital

1000
00:54:09,920 --> 00:54:11,880
business on a go forward basis.

1001
00:54:11,880 --> 00:54:17,760
And so to see those, see around those corners, I think, has been a valuable tool.

1002
00:54:17,760 --> 00:54:25,440
So how some businesses may employ AI and have an inflection in their own profitability

1003
00:54:25,440 --> 00:54:28,600
and economics is certainly an area of focus.

1004
00:54:28,600 --> 00:54:33,280
And you know, I would, what we would say with AI is that there's, there's a lot

1005
00:54:33,280 --> 00:54:34,600
of things that are flashy now.

1006
00:54:34,600 --> 00:54:41,080
I think the NVIDIA report everyone's like, whoa, you know, raise guidance 50% and

1007
00:54:41,080 --> 00:54:45,600
you know, that's certainly that's in the multiples and so forth.

1008
00:54:45,600 --> 00:54:53,560
So, but there are areas that are likely that in this disturbance that are probably aren't

1009
00:54:53,560 --> 00:54:58,480
people aren't focusing on it, but you might have some asymmetries, free call options on

1010
00:54:58,480 --> 00:55:05,800
AI can be employed to enhance their, which would be most important to us, their

1011
00:55:05,800 --> 00:55:08,680
sustainable competitive advantages.

1012
00:55:08,680 --> 00:55:14,440
And so when we saw, you know, Alphabet and, you know, there were a lot of asymmetries in

1013
00:55:14,440 --> 00:55:18,520
AI that weren't being discussed a year ago, two years ago, three years ago, you know, we

1014
00:55:18,520 --> 00:55:23,680
were, you know, I was lucky enough to meet Demis Hassabis early, on and through a mutual

1015
00:55:23,680 --> 00:55:29,920
friend and, you know, to be part of it just to see what he was doing firsthand and to see

1016
00:55:29,920 --> 00:55:35,680
the success that he had with, you know, AlphaGo and then, and now Alpha Fold with, with protein

1017
00:55:35,680 --> 00:55:38,720
folding is just, it's so moving to me.

1018
00:55:38,720 --> 00:55:47,840
And so I am witnessing the,  benefits to humanity of, of AI tools, not just what a lot

1019
00:55:47,840 --> 00:55:51,560
of, it's getting a lot of the headlines is, oh, this is awful for humanity.

1020
00:55:51,560 --> 00:55:57,960
It, I think there's a way that it could be very, very hopeful and very, very positive.

1021
00:55:57,960 --> 00:56:02,520
And that's, you know, we tend not to think in binary terms, but try to see the whole picture

1022
00:56:02,520 --> 00:56:09,960
and understand that this is a natural evolution of, of technology and, and human intellect.

1023
00:56:09,960 --> 00:56:15,800
Yeah, well Chris, we actually have a few questions from my audience members.

1024
00:56:15,800 --> 00:56:18,080
So, let me try to read them.

1025
00:56:18,080 --> 00:56:22,120
I don't have my glasses here.

1026
00:56:22,120 --> 00:56:24,120
What is your view on investing?

1027
00:56:24,120 --> 00:56:26,520
Oh, Scott's going to share his glasses.

1028
00:56:26,520 --> 00:56:28,720
This is the benefit of working with your spouse.

1029
00:56:28,720 --> 00:56:30,560
Oh, you guys are closer thank I expected. 

1030
00:56:30,560 --> 00:56:33,680
Yeah, we can share things.

1031
00:56:33,680 --> 00:56:40,280
Majid Ahamad has asked, what is your view on investing and alternative investments like

1032
00:56:40,280 --> 00:56:43,760
private equity, private credit or venture capital?

1033
00:56:43,760 --> 00:56:49,400
You know, our kind of sweet spot right now and has been for the last 20 years is,

1034
00:56:49,400 --> 00:56:50,800
is long only public equity.

1035
00:56:50,800 --> 00:56:53,480
And so that's the area of our focus.

1036
00:56:53,480 --> 00:56:58,640
And in our fund, we have some capabilities to do privates, but we haven't, you know,

1037
00:56:58,640 --> 00:56:59,640
exercised those.

1038
00:56:59,640 --> 00:57:04,520
And so I would, like you said, operate and constrained, but, but right now, that's not something

1039
00:57:04,520 --> 00:57:07,080
we're doing directly.

1040
00:57:07,080 --> 00:57:13,160
We have looked at businesses that operate in that realm and say a holding company form.

1041
00:57:13,160 --> 00:57:19,680
And so, you know, say a company like Brookfield, you know, I think Brookfield right now with Bruce

1042
00:57:19,680 --> 00:57:22,640
Flat running that business, you know, got to know Bruce over the years.

1043
00:57:22,640 --> 00:57:26,920
He's been a speaker in the class like, you know, are there some clouds around commercial

1044
00:57:26,920 --> 00:57:28,160
real estate now?

1045
00:57:28,160 --> 00:57:37,120
And who's set up to, to perhaps be very opportunistic in an environment that could, there's a lot

1046
00:57:37,120 --> 00:57:39,720
of, a lot of uncertainty.

1047
00:57:39,720 --> 00:57:42,080
So Brookfield has a lot of pillars.

1048
00:57:42,080 --> 00:57:45,320
They have their real estate business, they have their infrastructure business, they have renewable

1049
00:57:45,320 --> 00:57:49,840
business, they have private equity business, they have Oak Tree and, and distress credit.

1050
00:57:49,840 --> 00:57:59,080
So, they've a lot of levers to pull that speaks to your the question in these

1051
00:57:59,080 --> 00:58:01,640
areas when they should be pulled.

1052
00:58:01,640 --> 00:58:02,640
That's the most important.

1053
00:58:02,640 --> 00:58:06,960
It's, if you have a hammer, your hammer is distress credit and that's all you have, like,

1054
00:58:06,960 --> 00:58:10,040
like sometimes that's, it's not the right hammer.

1055
00:58:10,040 --> 00:58:12,120
Like, you want to have a lot of tools.

1056
00:58:12,120 --> 00:58:18,700
And I like Brookfield from that standpoint in a sense that they, they're very, they've

1057
00:58:18,700 --> 00:58:24,020
a lot of skin in the game and they can orient around what is reasonably priced at the time.

1058
00:58:24,020 --> 00:58:30,060
So that's, I would kind of think about that would be one way that we would be involved

1059
00:58:30,060 --> 00:58:37,660
in, and seeing something that, that we think is, is attractive that also kind of fits all

1060
00:58:37,660 --> 00:58:39,140
of our three pillars.

1061
00:58:39,140 --> 00:58:41,300
Yeah, that makes sense to me.

1062
00:58:41,300 --> 00:58:46,100
The next question is going to be from Mark Zashen.

1063
00:58:46,100 --> 00:58:52,140
And it, it goes to the conversation you and Scott were having about AI, but how do you, how

1064
00:58:52,140 --> 00:58:56,900
do you view NVIDIA in AI and how is it different from the dot com craze?

1065
00:58:56,900 --> 00:58:57,900
Yeah.

1066
00:58:57,900 --> 00:59:00,660
Is this a bubble?

1067
00:59:00,660 --> 00:59:06,060
Yeah, so the bubbles are always perfect in, in hindsight, aren't they?

1068
00:59:06,060 --> 00:59:08,540
It's like, of course, it was the NVIDIA of earnings note.

1069
00:59:08,540 --> 00:59:09,780
That was the thing.

1070
00:59:09,780 --> 00:59:15,820
But, you know, I think when you, when we're in the midst of, of what's happening now,

1071
00:59:15,820 --> 00:59:21,940
what I'll say is, NVIDIA is, is the picks and shovels in the gold rush.

1072
00:59:21,940 --> 00:59:25,380
Like there was a massive investment being made.

1073
00:59:25,380 --> 00:59:30,660
If you just look at the, the Capex of, of Meta over the last two years, we literally

1074
00:59:30,660 --> 00:59:34,900
are looking at these numbers and just scratching ahead like, what are they spending this money

1075
00:59:34,900 --> 00:59:37,860
on is so much, there's so much capital expenditures.

1076
00:59:37,860 --> 00:59:39,500
And what they were doing is they buying chips, right?

1077
00:59:39,500 --> 00:59:47,180
Or they were building in house their own capabilities to, to harness AI.

1078
00:59:47,180 --> 00:59:49,540
They weren't building it on a public cloud.

1079
00:59:49,540 --> 00:59:51,140
They weren't utilizing Amazon servers.

1080
00:59:51,140 --> 00:59:52,500
They were building it internally.

1081
00:59:52,500 --> 00:59:57,900
So we saw a major investment in those picks and shovels in this gold rush, which is AI.

1082
00:59:57,900 --> 01:00:01,940
Everyone's having the capability to have LLMs internally or they're, or they're harnessing

1083
01:00:01,940 --> 01:00:07,220
it through the three public cloud providers.

1084
01:00:07,220 --> 01:00:11,500
So my answer to that, I'm not sure if this is a bubble.

1085
01:00:11,500 --> 01:00:19,220
I think we, it has the setup to produce some bubble situations.

1086
01:00:19,220 --> 01:00:23,820
What's always important to us is, leaning on free cash flow.

1087
01:00:23,820 --> 01:00:27,740
We can actually understand this is the free cash flow generation, the unique economics of

1088
01:00:27,740 --> 01:00:28,740
the business.

1089
01:00:28,740 --> 01:00:32,100
And this is what we think it's going to look like over the next five to ten years.

1090
01:00:32,100 --> 01:00:34,380
And then what do we have to pay for that earning?

1091
01:00:34,380 --> 01:00:35,380
Free cash flow stream.

1092
01:00:35,380 --> 01:00:38,140
We can't answer that definitively.

1093
01:00:38,140 --> 01:00:43,140
We have a lot of uncertainty in that.

1094
01:00:43,140 --> 01:00:47,780
It's, we just avoid it, you know, it's just, you know, and that's how we've decided is

1095
01:00:47,780 --> 01:00:52,500
you can't understand at that level, everything.

1096
01:00:52,500 --> 01:00:57,620
That's what got a lot of people got in trouble when interest rates were zero.

1097
01:00:57,620 --> 01:01:00,060
And I think there was such a distortion field, right?

1098
01:01:00,060 --> 01:01:04,820
Oh, this company will be free cash flow positive five years from now, ten years from now.

1099
01:01:04,820 --> 01:01:09,940
And so we saw the Sony businesses that were just, another down 80, you know, 80 percent,

1100
01:01:09,940 --> 01:01:15,940
between 16 and 90 percent on a lot of these companies that were darlings of that period.

1101
01:01:15,940 --> 01:01:19,380
But the free cash flow generation just wasn't apparent.

1102
01:01:19,380 --> 01:01:24,420
And it's like, if you can't be free cash flow positive now, when are you going to be?

1103
01:01:24,420 --> 01:01:28,300
That's a good point.

1104
01:01:28,300 --> 01:01:30,460
Well, this has been so enjoyable.

1105
01:01:30,460 --> 01:01:35,820
I have one more question from the same audience member. He's very excited that you're coming

1106
01:01:35,820 --> 01:01:37,220
on as a guest.

1107
01:01:37,220 --> 01:01:41,700
But he says, do you have a threshold for returns on invested capital?

1108
01:01:41,700 --> 01:01:46,180
And what happens when one of your holdings goes below the returns on invested capital,

1109
01:01:46,180 --> 01:01:47,660
threshold?

1110
01:01:47,660 --> 01:01:52,940
Do trillion dollar tech stocks prove to you that they have a longstanding moat?

1111
01:01:52,940 --> 01:01:56,700
There's a lot of that question.

1112
01:01:56,700 --> 01:01:57,700
Yeah.

1113
01:01:57,700 --> 01:02:02,500
So, ROIC, our return on invested capital, I can operate unconstrained.

1114
01:02:02,500 --> 01:02:11,780
I would say more often than not, I don't trust stated ROIC numbers.

1115
01:02:11,780 --> 01:02:16,420
It's we really want to scrub the numbers and understanding what's the unit economics.

1116
01:02:16,420 --> 01:02:19,940
And what is our true return on invested capital of the business?

1117
01:02:19,940 --> 01:02:21,380
What do we think the business earns?

1118
01:02:21,380 --> 01:02:24,180
So we don't try to paint by numbers.

1119
01:02:24,180 --> 01:02:28,780
We just really understand, start peel back the layers and say, what does this business do?

1120
01:02:28,780 --> 01:02:29,780
What do they sell?

1121
01:02:29,780 --> 01:02:30,940
What are their margins?

1122
01:02:30,940 --> 01:02:33,980
How much investment is needed in the business?

1123
01:02:33,980 --> 01:02:37,660
And what do we think that free cash flow generation is going to be?

1124
01:02:37,660 --> 01:02:42,540
How much maintenance CapEx, are we going to need to run the business?

1125
01:02:42,540 --> 01:02:45,860
So those are things that we're just getting our hands dirty on.

1126
01:02:45,860 --> 01:02:49,060
We're not trying to do it on a screen.

1127
01:02:49,060 --> 01:02:51,620
ROIC is above 20%.

1128
01:02:51,620 --> 01:02:56,300
It could identify some ideas that might be attractive businesses.

1129
01:02:56,300 --> 01:03:02,100
And so, there could be something that screens at 10% ROIC, that's really at 20.

1130
01:03:02,100 --> 01:03:05,340
When you really scrub the numbers, it's like, no, this is at 20.

1131
01:03:05,340 --> 01:03:08,460
Those gap earnings are not right.

1132
01:03:08,460 --> 01:03:13,020
Oftentimes, that's happened a lot as we find things that are actually way more attractive

1133
01:03:13,020 --> 01:03:17,620
than they might screen.

1134
01:03:17,620 --> 01:03:21,220
But generally, I'd love to buy things 20% better ROIC.

1135
01:03:21,220 --> 01:03:29,380
And that ROIC over time is going to equate to maybe some of their compound annual returns, right?

1136
01:03:29,380 --> 01:03:34,660
The second part of the question spoke to trillion dollar market caps.

1137
01:03:34,660 --> 01:03:40,540
A trillion dollar market cap could be the cheapest business in the world.

1138
01:03:40,540 --> 01:03:41,540
Not sure.

1139
01:03:41,540 --> 01:03:42,540
It depends.

1140
01:03:42,540 --> 01:03:43,540
It all depends.

1141
01:03:43,540 --> 01:03:51,020
I think Google could, three months ago, may have been most attractive business in the

1142
01:03:51,020 --> 01:03:53,540
world at the asymmetry of those returns.

1143
01:03:53,540 --> 01:03:55,860
So, we're not scared off by market cap.

1144
01:03:55,860 --> 01:04:00,700
We just bought one of our new businesses is 4 billion dollar market cap.

1145
01:04:00,700 --> 01:04:03,100
We own things that are billion dollar market cap.

1146
01:04:03,100 --> 01:04:08,500
So, market cap is not a function of value.

1147
01:04:08,500 --> 01:04:16,460
It's the free cash flow generation on what we have to pay for the enterprise is most important.

1148
01:04:16,460 --> 01:04:17,460
Great.

1149
01:04:17,460 --> 01:04:19,860
Well, I have two fun questions for you.

1150
01:04:19,860 --> 01:04:22,180
Firstly, and I'll have to describe it.

1151
01:04:22,180 --> 01:04:26,020
A lot of people listen to the podcast, just audio version.

1152
01:04:26,020 --> 01:04:32,340
But you're sitting in your home office and there are two stacks of books behind you.

1153
01:04:32,340 --> 01:04:37,620
And I guess this is a piece of artwork or these books that you've actually read and what is

1154
01:04:37,620 --> 01:04:40,860
stabilizing them, they're like 10 feet tall, a piece.

1155
01:04:40,860 --> 01:04:43,180
You clearly don't have a dog.

1156
01:04:43,180 --> 01:04:45,260
I do have an English cream golden retriever.

1157
01:04:45,260 --> 01:04:46,260
I see.

1158
01:04:46,260 --> 01:04:47,260
Oh, we do too.

1159
01:04:47,260 --> 01:04:48,260
We have English cream.

1160
01:04:48,260 --> 01:04:50,980
Oh, what's her, her, her, his name?

1161
01:04:50,980 --> 01:04:52,100
His name is Cash.

1162
01:04:52,100 --> 01:04:53,460
He came with the name.

1163
01:04:53,460 --> 01:04:55,460
Our other dog is a boy named Sue.

1164
01:04:55,460 --> 01:04:58,500
So, it's a Johnny Cash kind of theme going on.

1165
01:04:58,500 --> 01:04:59,660
What is yours?

1166
01:04:59,660 --> 01:05:03,260
Max after James Clerk Maxwell, the father of the electromagnetic radiation.

1167
01:05:03,260 --> 01:05:06,540
Oh, yours is much smarter.

1168
01:05:06,540 --> 01:05:12,420
But these bookcases are, I love them because they're, they're actually all individual.

1169
01:05:12,420 --> 01:05:13,420
So, it's not stacking.

1170
01:05:13,420 --> 01:05:14,900
It's not going to fall down.

1171
01:05:14,900 --> 01:05:18,060
But they are oriented this way.

1172
01:05:18,060 --> 01:05:19,700
But they're called sapien bookcases.

1173
01:05:19,700 --> 01:05:24,100
They're vertical for your, for your listening audience.

1174
01:05:24,100 --> 01:05:29,700
And I am in my home office and I live about a mile from the office, but I thought it'd be

1175
01:05:29,700 --> 01:05:37,580
fun to, you know, to do this here in a quiet, in a quiet place with no interruptions.

1176
01:05:37,580 --> 01:05:41,980
And you mentioned artwork.

1177
01:05:41,980 --> 01:05:45,340
You know, one of the things I've been getting into this spring, I've never done this before

1178
01:05:45,340 --> 01:05:53,020
because I told myself I wasn't an artist is I've taken up painting with my little boy who's

1179
01:05:53,020 --> 01:06:00,660
four and we, we created a little art studio here on the property and we just went painting.

1180
01:06:00,660 --> 01:06:06,700
We started with watercolors and I've graduated to oil painting, which is very messy and, but

1181
01:06:06,700 --> 01:06:14,700
I'm having so much fun and I've kind of leaned into this, you know, this concept of, on

1182
01:06:14,700 --> 01:06:20,380
the, on unobstructed self expression, you know, not being the artist that oriented to who

1183
01:06:20,380 --> 01:06:21,380
you are.

1184
01:06:21,380 --> 01:06:24,020
And this is investing or anything.

1185
01:06:24,020 --> 01:06:29,820
But when I realize that, okay, I don't have to be this perfectly illustrative painter where

1186
01:06:29,820 --> 01:06:32,180
it's going to look like the reality.

1187
01:06:32,180 --> 01:06:37,300
But I've kind of been leaning into expressionism or leaning into like what this landscape feels

1188
01:06:37,300 --> 01:06:39,300
like to me.

1189
01:06:39,300 --> 01:06:40,500
I've had so much fun with it.

1190
01:06:40,500 --> 01:06:46,600
So, and my little boy, he'll, River will just be, I'll look over at his, he

1191
01:06:46,600 --> 01:06:48,740
set up our, our little easels next to each other.

1192
01:06:48,740 --> 01:06:49,740
I'll look over at his.

1193
01:06:49,740 --> 01:06:55,100
He's kind of like doing what I'm doing and so it's just taught him a little bit about,

1194
01:06:55,100 --> 01:06:58,100
you know, hey, we're all artists.

1195
01:06:58,100 --> 01:07:03,620
There shouldn't be this, this feeling that we have to, you know, that this is an expression.

1196
01:07:03,620 --> 01:07:09,060
So I found it to be a really fun hobby that it's turned into.

1197
01:07:09,060 --> 01:07:13,660
Like if I have 15 or 20 minutes, I'll just kind of, you know, throw up a little something

1198
01:07:13,660 --> 01:07:15,380
on the easel and just, and play.

1199
01:07:15,380 --> 01:07:17,220
So, that's a lot of fun.

1200
01:07:17,220 --> 01:07:19,460
I've done that a little bit in the past.

1201
01:07:19,460 --> 01:07:25,260
I have not done that in a few years, but when the girls were smaller and I actually threw

1202
01:07:25,260 --> 01:07:31,460
out a canvas one time and the public works department on Lookout Mountain now has that

1203
01:07:31,460 --> 01:07:32,860
piece of artwork in there.

1204
01:07:32,860 --> 01:07:34,900
Like he was like, I found in your garbage.

1205
01:07:34,900 --> 01:07:35,900
I think it looks great.

1206
01:07:35,900 --> 01:07:36,900
Oh my, well.

1207
01:07:36,900 --> 01:07:37,900
I mean, to each his own.

1208
01:07:37,900 --> 01:07:39,900


1209
01:07:39,900 --> 01:07:40,900
I don't know.

1210
01:07:40,900 --> 01:07:42,900
I was like, oh gosh.

1211
01:07:42,900 --> 01:07:46,740
I don't know if I want all my artwork out there like that.

1212
01:07:46,740 --> 01:07:50,820
My next question for you is in regards to your surfing and water sports.

1213
01:07:50,820 --> 01:07:54,140
Can you tell me what has attracted you to this hobby?

1214
01:07:54,140 --> 01:07:57,060
Yeah, so it is.

1215
01:07:57,060 --> 01:08:02,900
It's one of my passions is, you know, originally it started with growing up on Cape Cod, being

1216
01:08:02,900 --> 01:08:06,700
around water all the time and just loving to play on the water, you know.

1217
01:08:06,700 --> 01:08:12,820
If it was behind the boat or if we were skin boarding and I'd say over the last 15 or 20 years

1218
01:08:12,820 --> 01:08:15,220
it's oriented or more towards surfing.

1219
01:08:15,220 --> 01:08:18,860
We have surfing here in the Northeast.

1220
01:08:18,860 --> 01:08:24,280
My family spends a few months down in Central America where we have, are more accessible to

1221
01:08:24,280 --> 01:08:28,140
surfing while we're working days when we have mornings and evenings.

1222
01:08:28,140 --> 01:08:30,460
Where in Central America?

1223
01:08:30,460 --> 01:08:31,460
So we're in Costa Rica.

1224
01:08:31,460 --> 01:08:32,460
Okay.

1225
01:08:32,460 --> 01:08:35,780
I've never been but I've always wanted to go.

1226
01:08:35,780 --> 01:08:43,380
It's become a lovely part of our adventure and journey and the locals are just, you know,

1227
01:08:43,380 --> 01:08:48,020
become so many of our best friends.

1228
01:08:48,020 --> 01:08:55,540
So surfing is such a lifelong, something you can do forever.

1229
01:08:55,540 --> 01:08:59,700
It's active, the community that you're able to be a part of.

1230
01:08:59,700 --> 01:09:00,700
It's very simple.

1231
01:09:00,700 --> 01:09:03,420
You have a board, your board shorts, walking out.

1232
01:09:03,420 --> 01:09:07,500
In the Northeast we were thick wet suits but it's okay.

1233
01:09:07,500 --> 01:09:12,700
I've taken up foil surfing over the last six or seven years and that's been a passion

1234
01:09:12,700 --> 01:09:17,260
that is kind of, I always try to say, you know, how do I make myself a little bit more

1235
01:09:17,260 --> 01:09:24,660
uncomfortable and orient on something that might be a little bit more challenging.

1236
01:09:24,660 --> 01:09:27,700
But yeah, no, it's something I'm loving.

1237
01:09:27,700 --> 01:09:31,900
Actually, I've been doing less surfing over the last three, less month and a half and

1238
01:09:31,900 --> 01:09:37,700
more mountain biking here in New England and on trail and hiking and stuff like that.

1239
01:09:37,700 --> 01:09:39,180
Yeah, that's so fun.

1240
01:09:39,180 --> 01:09:41,980
I love outdoor activities.

1241
01:09:41,980 --> 01:09:47,180
And Scott and I, our office is also about a mile from our house.

1242
01:09:47,180 --> 01:09:55,580
So I don't think that is, I think that's very similar with investors that really thoughtful

1243
01:09:55,580 --> 01:10:02,980
investors find a way to organize their life that is convenient and like we live in a place

1244
01:10:02,980 --> 01:10:07,660
where we can easily, the outdoors is easily accessible.

1245
01:10:07,660 --> 01:10:12,500
I mean, I walk across the street and I'm on a trail that takes me along the side of Lookout

1246
01:10:12,500 --> 01:10:19,420
Mountain and I think it's so important to the way you build your investment business,

1247
01:10:19,420 --> 01:10:21,900
the way you think, the way you organize your day.

1248
01:10:21,900 --> 01:10:22,900
So.

1249
01:10:22,900 --> 01:10:28,780
Yeah, I think when you look at Warren and Omaha, Nebraska, you know, living in his first home

1250
01:10:28,780 --> 01:10:36,660
and Charlie in Santa Barbara + LA, you know, you picture how they're reading and how that

1251
01:10:36,660 --> 01:10:40,980
sets up, it's part of their competitive advantage.

1252
01:10:40,980 --> 01:10:47,380
And, you know, so, you know, geography was a big part of how we oriented where we put East

1253
01:10:47,380 --> 01:10:54,740
Coast and how it sets up for just, you know, deep thinking, not being, taking a lot of meetings,

1254
01:10:54,740 --> 01:10:57,420
not being distracted.

1255
01:10:57,420 --> 01:11:01,180
And, you know, that's, that's been really important to us.

1256
01:11:01,180 --> 01:11:02,820
I've been to your neck of the woods.

1257
01:11:02,820 --> 01:11:08,020
You had mentioned before we have, before we started recording, you know, being on the, on

1258
01:11:08,020 --> 01:11:13,140
the Chattanooga River and such a beautiful place where you, where you both live.

1259
01:11:13,140 --> 01:11:14,140
So.

1260
01:11:14,140 --> 01:11:15,660
Yeah, it is really, really beautiful.

1261
01:11:15,660 --> 01:11:18,660
We enjoy working and living here.

1262
01:11:18,660 --> 01:11:21,820
And we also really appreciate the time you've spent with us today.

1263
01:11:21,820 --> 01:11:24,100
This has been a fascinating conversation.

1264
01:11:24,100 --> 01:11:30,020
I'm glad that my audience is getting the opportunity to learn from you and to meet you for

1265
01:11:30,020 --> 01:11:32,700
those that have not met you.

1266
01:11:32,700 --> 01:11:36,740
And I wish you all the best and I know we'll stay in touch.

1267
01:11:36,740 --> 01:11:41,740
And the next time you're in Chattanooga, you'll have to come on over and visit our office.

1268
01:11:41,740 --> 01:11:42,740
Absolutely.

1269
01:11:42,740 --> 01:11:43,740
Thank you, Lauren.

1270
01:11:43,740 --> 01:11:44,740
Thank you, Scott.

1271
01:11:44,740 --> 01:11:47,160
really, really enjoyed this. Thank you, Chris.