1 00:00:03,120 --> 00:00:06,280 Speaker 1: This week on the podcast, I have Jeff Graham. He 2 00:00:06,640 --> 00:00:10,360 Speaker 1: is the author of a really interesting book of which 3 00:00:10,640 --> 00:00:14,040 Speaker 1: I will pull out of my bag right now, and 4 00:00:14,080 --> 00:00:18,840 Speaker 1: the title is Dear Chairman, Boardroom Battles and the Rise 5 00:00:19,320 --> 00:00:24,400 Speaker 1: of Shareholder Activism. UM. Funny story those of you who 6 00:00:24,440 --> 00:00:27,880 Speaker 1: listen to the show regularly. No, I've had the former 7 00:00:28,800 --> 00:00:32,600 Speaker 1: SEC chairman Arthur Levitt as a guest twice, once just 8 00:00:32,720 --> 00:00:36,320 Speaker 1: to talk about Arthur Lever type stuff and another was 9 00:00:36,360 --> 00:00:39,760 Speaker 1: a segment dedicated to changes in regulation. They were both 10 00:00:39,800 --> 00:00:43,280 Speaker 1: really interesting. Anyway, Um, one day I get an email 11 00:00:43,360 --> 00:00:46,880 Speaker 1: from Arthur and he writes, I have an interesting young man. 12 00:00:47,000 --> 00:00:49,040 Speaker 1: You should you should me that he wrote the book 13 00:00:49,479 --> 00:00:52,599 Speaker 1: Dear Chairman. Right, Why does that sound familiar? Turns out 14 00:00:52,640 --> 00:00:54,520 Speaker 1: to the guys in my office had already read it. 15 00:00:55,040 --> 00:00:57,920 Speaker 1: Both of them really liked it, and so I right 16 00:00:58,000 --> 00:01:02,279 Speaker 1: back to Arthur. Yeah, I'm interested. Didn't in speaking to him, 17 00:01:02,320 --> 00:01:06,440 Speaker 1: but full disclosure, you know, in Bail Out Nation, I 18 00:01:06,560 --> 00:01:09,280 Speaker 1: kind of trashed his dad, who happens to be Senator 19 00:01:09,680 --> 00:01:12,480 Speaker 1: Phil Graham, and I've said stuff about his mom in print. 20 00:01:12,840 --> 00:01:16,319 Speaker 1: Nothing ed homin him or anything. Just I've written critically 21 00:01:16,400 --> 00:01:20,520 Speaker 1: about about what they've done professionally, and you know we 22 00:01:20,600 --> 00:01:24,200 Speaker 1: really should is that okay? Is that gonna be a problem? 23 00:01:24,200 --> 00:01:27,760 Speaker 1: Should we disclose that? And author writes back, That's not 24 00:01:27,800 --> 00:01:31,920 Speaker 1: gonna be a problem. Okay, Fine, So instead of sending 25 00:01:31,920 --> 00:01:36,120 Speaker 1: a separate email, Arthur just replies to that email with 26 00:01:36,319 --> 00:01:41,800 Speaker 1: um my comments to Jeff, copies copies, May and um, hey, 27 00:01:41,840 --> 00:01:44,880 Speaker 1: you guys should get together and and talk about the 28 00:01:44,880 --> 00:01:48,000 Speaker 1: book on Masters and Business. And I kind of do 29 00:01:48,120 --> 00:01:51,440 Speaker 1: a you know, a face palm. Oh, Arthur, you really 30 00:01:51,520 --> 00:01:55,760 Speaker 1: don't have the email skills you should, But anyway, um, 31 00:01:56,240 --> 00:01:59,160 Speaker 1: Jeff was a good sport about it, and growing up 32 00:01:59,200 --> 00:02:03,480 Speaker 1: the son of Senator um it wasn't the first time 33 00:02:03,560 --> 00:02:06,280 Speaker 1: someone had had been critical of his dad. So if 34 00:02:06,320 --> 00:02:09,880 Speaker 1: you were at all interested in activist investing or the 35 00:02:10,000 --> 00:02:14,200 Speaker 1: history of of value investing, I thought this was really 36 00:02:14,560 --> 00:02:18,480 Speaker 1: interesting conversation. So, with no further ado, here is my 37 00:02:18,600 --> 00:02:25,800 Speaker 1: conversation with Jeff Graham. This is Masters in Business with 38 00:02:25,880 --> 00:02:30,920 Speaker 1: Barry Ridholts on Bloomberg Radio. My guest today is Jeff Graham. 39 00:02:31,000 --> 00:02:33,720 Speaker 1: Let me give you a little background on Mr Graham. 40 00:02:33,800 --> 00:02:37,080 Speaker 1: He is the founder of Bandera Partners, which is a 41 00:02:37,080 --> 00:02:39,840 Speaker 1: hedge fund located here in New York City. He is 42 00:02:39,880 --> 00:02:43,639 Speaker 1: a graduate of the University of Chicago, got his NBA 43 00:02:43,840 --> 00:02:47,240 Speaker 1: from Columbia School of Business, where he is currently an 44 00:02:47,280 --> 00:02:50,760 Speaker 1: adjunct professor. He is also on the boards of several 45 00:02:50,800 --> 00:02:55,200 Speaker 1: publicly traded companies. He comes from an interesting family. He 46 00:02:55,360 --> 00:02:58,720 Speaker 1: is the son of Senator Phil Graham and Wendy Graham, 47 00:02:58,760 --> 00:03:01,720 Speaker 1: and most interesting to me, he is the author of 48 00:03:01,760 --> 00:03:05,600 Speaker 1: the book Dear Chairman, Boardroom Battles and the Rise of 49 00:03:05,720 --> 00:03:10,480 Speaker 1: Shareholder Activism. Jeff Graham, Welcome to Bloomberg. Thanks for having me. 50 00:03:10,560 --> 00:03:13,040 Speaker 1: I'm a big fan of the show. Well, that's terrific. 51 00:03:13,120 --> 00:03:15,880 Speaker 1: Thank you, And I enjoyed your book. I'm like halfway 52 00:03:15,880 --> 00:03:18,400 Speaker 1: through it and and really enjoyed it. Several people in 53 00:03:18,480 --> 00:03:22,000 Speaker 1: my office read it and recommended it. I love the 54 00:03:22,040 --> 00:03:24,480 Speaker 1: origin story you tell in the very beginning of the 55 00:03:24,520 --> 00:03:29,760 Speaker 1: book of William Schlensky, who got two shares of stock 56 00:03:29,960 --> 00:03:33,840 Speaker 1: in the Chicago Cubs, and that led essentially to the 57 00:03:33,960 --> 00:03:36,840 Speaker 1: rise of shareholder activism. For people who may not be 58 00:03:36,920 --> 00:03:40,080 Speaker 1: familiar with the history of the Chicago Cubs, what happened 59 00:03:40,160 --> 00:03:43,600 Speaker 1: with Mr Schlensky? Sure, well, so Bill Slensky got two 60 00:03:43,600 --> 00:03:45,880 Speaker 1: shares in the Cubs as a birthday gift. How old 61 00:03:45,960 --> 00:03:47,880 Speaker 1: was he at the time, I think he was eighteen 62 00:03:47,960 --> 00:03:51,400 Speaker 1: or nineteen, and he decided like, look, you know, we've 63 00:03:51,440 --> 00:03:54,480 Speaker 1: all been in, you know, enduring these these years of 64 00:03:54,600 --> 00:03:58,440 Speaker 1: terrible baseball, and he thought it, you know, was driven 65 00:03:58,520 --> 00:04:01,040 Speaker 1: by the fact that they did not have lights on 66 00:04:01,040 --> 00:04:03,960 Speaker 1: Wrigley Field. So this is this is in the forties 67 00:04:04,040 --> 00:04:07,760 Speaker 1: and sixties, most of Major League Baseball had moved to 68 00:04:08,000 --> 00:04:12,040 Speaker 1: night games that were really popular. Crosstown rival White Sox, 69 00:04:12,400 --> 00:04:15,600 Speaker 1: we're getting quadruple Oh yeah, they were getting like, you know, 70 00:04:15,760 --> 00:04:21,720 Speaker 1: fifteen eighteen thousand people at night at the game. Yeah, 71 00:04:21,720 --> 00:04:24,520 Speaker 1: because they're like on a Wednesday afternoon, you know, people 72 00:04:24,560 --> 00:04:28,240 Speaker 1: have to work and so um. He thought, well, you 73 00:04:28,279 --> 00:04:32,839 Speaker 1: know this is a feeding the poor performance of the Cubs, 74 00:04:33,080 --> 00:04:36,279 Speaker 1: and um u um. He suited them as a shareholder, 75 00:04:36,720 --> 00:04:39,960 Speaker 1: saying that, you know, you're neglecting your your shareholders by 76 00:04:40,000 --> 00:04:43,760 Speaker 1: refusing to put lights onto onto Wrigley Field. So what 77 00:04:43,839 --> 00:04:47,240 Speaker 1: was the outcome of the suit He lost. Basically, the 78 00:04:47,279 --> 00:04:50,640 Speaker 1: defense of the Wriggley's was that, look, I mean, you know, 79 00:04:50,839 --> 00:04:53,480 Speaker 1: we care about the shareholders, but we care about the 80 00:04:54,080 --> 00:04:59,120 Speaker 1: stakeholders to including the community. So the business judgment rule 81 00:04:59,320 --> 00:05:02,799 Speaker 1: basically married the day. Yeah, and which meant that they're 82 00:05:02,920 --> 00:05:05,839 Speaker 1: they're not responsible for being correct. It just has to 83 00:05:05,839 --> 00:05:09,919 Speaker 1: be an exercise of their judgment right or wrong. Well like, 84 00:05:09,960 --> 00:05:12,080 Speaker 1: and they were very clear that they thought that it 85 00:05:12,120 --> 00:05:15,239 Speaker 1: would be extremely bad for the neighborhood of Wrigley Field 86 00:05:15,400 --> 00:05:17,800 Speaker 1: if they put lights on on Wrigley Field, and that 87 00:05:17,880 --> 00:05:20,520 Speaker 1: the board you know, made the judgment that that was 88 00:05:20,560 --> 00:05:23,120 Speaker 1: the right thing to do. But in the long run, 89 00:05:23,240 --> 00:05:26,720 Speaker 1: economics sell wins, and eventually they had to, like the 90 00:05:26,880 --> 00:05:29,200 Speaker 1: league essentially forced them to put those lights up. So 91 00:05:29,520 --> 00:05:33,719 Speaker 1: shareholder activism goes long before the nineteen sixties. Use the 92 00:05:34,040 --> 00:05:38,720 Speaker 1: example of the Dutch East India Company and shareholders were 93 00:05:38,800 --> 00:05:42,040 Speaker 1: angry about self dealing about the directors. How did that 94 00:05:42,080 --> 00:05:45,919 Speaker 1: manifest itself? Yeah, Well, I mean, like I think through history, 95 00:05:46,600 --> 00:05:51,400 Speaker 1: like you've seen, uh, you know, will owners metal and 96 00:05:51,440 --> 00:05:54,960 Speaker 1: then you know, like you do have this inherent problem 97 00:05:55,000 --> 00:05:59,120 Speaker 1: in the system, the principal agency conflicts. So you have 98 00:05:59,160 --> 00:06:02,880 Speaker 1: people running the management running a business essential in behalf 99 00:06:02,920 --> 00:06:06,040 Speaker 1: of the owners, and that creates a little bit of 100 00:06:06,080 --> 00:06:10,719 Speaker 1: conflict for the managers to enrich themselves at the owner's expense. Well, 101 00:06:10,760 --> 00:06:14,000 Speaker 1: and when you think about the principal agent problem in 102 00:06:14,040 --> 00:06:18,520 Speaker 1: this particular case, it's extremely thorny because the principle are 103 00:06:18,560 --> 00:06:22,080 Speaker 1: the shareholders and that's a collective group that often have 104 00:06:22,279 --> 00:06:26,320 Speaker 1: you know, differing in incentives and goals. And the agent 105 00:06:27,040 --> 00:06:29,919 Speaker 1: is a board of directors where they're often you know, 106 00:06:30,000 --> 00:06:33,600 Speaker 1: they're not that engaged in the business, like the information 107 00:06:33,640 --> 00:06:36,080 Speaker 1: that that they get about the business is fed to 108 00:06:36,120 --> 00:06:39,520 Speaker 1: them by management. You know. So it's a principle and 109 00:06:39,680 --> 00:06:43,640 Speaker 1: agent problem. And there's also some inherent issues with the 110 00:06:43,680 --> 00:06:46,520 Speaker 1: principle and the nature of the agent. So a lot 111 00:06:46,600 --> 00:06:48,800 Speaker 1: of the letters that you published in the book have 112 00:06:49,080 --> 00:06:52,000 Speaker 1: never been published before. How did you manage to track 113 00:06:52,080 --> 00:06:54,800 Speaker 1: these things down? Yeah? I mean, you know, the the 114 00:06:54,880 --> 00:06:58,480 Speaker 1: kind of hook of the book is it's all case studies, 115 00:06:59,000 --> 00:07:02,200 Speaker 1: and each of the case his comes with an original letter. 116 00:07:02,680 --> 00:07:06,240 Speaker 1: And so for lots of them, I knew the letter existed. 117 00:07:06,360 --> 00:07:09,080 Speaker 1: Like in the in the Benjamin Graham chapter that's the 118 00:07:09,120 --> 00:07:11,880 Speaker 1: first chapter in the book, he ran a proxy fight 119 00:07:11,920 --> 00:07:15,200 Speaker 1: against the Northern Pipeline Company, and he had written, you know, 120 00:07:15,240 --> 00:07:18,520 Speaker 1: there's a whole chapter about that proxy fight in his memoir, 121 00:07:19,040 --> 00:07:21,920 Speaker 1: And so I knew the letter was out there. Um, 122 00:07:21,960 --> 00:07:24,280 Speaker 1: it's just a question of of trying to find it. 123 00:07:24,320 --> 00:07:27,120 Speaker 1: And like I talked to his family and his biographers 124 00:07:27,240 --> 00:07:30,440 Speaker 1: and um, and no one had it. And ultimately I 125 00:07:30,560 --> 00:07:33,080 Speaker 1: found it at the Rockefeller Archives, but lots of them. 126 00:07:33,080 --> 00:07:35,400 Speaker 1: I just asked, I mean, like, you know, with Warren Buffett, 127 00:07:35,480 --> 00:07:38,960 Speaker 1: like I knew from the Snowball that he wrote the 128 00:07:39,040 --> 00:07:42,720 Speaker 1: letter Snowball about Buffett. Yeah, he famously wrote a letter 129 00:07:42,840 --> 00:07:45,960 Speaker 1: to American Express in the nineteen sixties, And so I 130 00:07:46,000 --> 00:07:48,600 Speaker 1: just wrote, Buffett, just explain the concept of the book, 131 00:07:48,600 --> 00:07:50,320 Speaker 1: and can you share the letter. And I got to 132 00:07:50,440 --> 00:07:52,680 Speaker 1: work one day and there's a there's an envelope with 133 00:07:52,720 --> 00:07:55,320 Speaker 1: a letter in it, and and I want to take 134 00:07:55,480 --> 00:07:57,560 Speaker 1: for that to get back to you from from the request, 135 00:07:57,680 --> 00:08:00,680 Speaker 1: well weeks, you know, two weeks. There are lots of 136 00:08:00,720 --> 00:08:03,760 Speaker 1: interesting stories about people making requests about the Buffett and 137 00:08:04,120 --> 00:08:07,960 Speaker 1: things magically show up. It's uh, it's fascinating. So so 138 00:08:08,000 --> 00:08:10,720 Speaker 1: what motivated you to write this book? What was your 139 00:08:11,280 --> 00:08:14,840 Speaker 1: drive to to put this together? Well, I mean, I 140 00:08:14,920 --> 00:08:18,000 Speaker 1: love writing, and I've always you know, thought that that 141 00:08:18,080 --> 00:08:21,080 Speaker 1: I had like the writing chops to do a book, 142 00:08:22,160 --> 00:08:24,120 Speaker 1: but really with this one, you know, I'm a full 143 00:08:24,120 --> 00:08:26,240 Speaker 1: time fund manager, like I didn't have the time. I 144 00:08:26,680 --> 00:08:30,040 Speaker 1: had two little kids. You know, when I got the 145 00:08:30,160 --> 00:08:33,120 Speaker 1: letter from Warren Buffett, like it kind of you know, 146 00:08:33,240 --> 00:08:36,559 Speaker 1: turned this idea that I had vaguely had, I'll write, like, 147 00:08:36,600 --> 00:08:38,599 Speaker 1: I'll see if you'll do something. And then all of 148 00:08:38,640 --> 00:08:40,640 Speaker 1: a sudden, like I had this up pressure of like, 149 00:08:40,679 --> 00:08:43,040 Speaker 1: well I had this thing. I kind of burned a 150 00:08:43,040 --> 00:08:46,040 Speaker 1: hole in my pocket. Like I got the Buffet letter 151 00:08:46,080 --> 00:08:49,199 Speaker 1: and the Ross Paro letter like within weeks of each other, 152 00:08:49,360 --> 00:08:52,880 Speaker 1: and you know, yeah, I mean the Parro and is 153 00:08:52,920 --> 00:08:55,160 Speaker 1: a is a fabulous you know letter. It had not 154 00:08:55,240 --> 00:08:57,080 Speaker 1: been published, and I just thought, well, I have to 155 00:08:57,080 --> 00:08:59,520 Speaker 1: do this. Now. Let's talk a little bit about no relation. 156 00:08:59,679 --> 00:09:03,400 Speaker 1: Ben Graham spelled with two a's and and one m. 157 00:09:03,520 --> 00:09:07,160 Speaker 1: People think about Ben Graham and they obviously think about 158 00:09:07,200 --> 00:09:11,080 Speaker 1: the intelligent investor and value investing in the whole school 159 00:09:11,120 --> 00:09:15,200 Speaker 1: of thought that that comes out of that. Uh, But 160 00:09:15,360 --> 00:09:17,760 Speaker 1: he also turned out to be a bit of an 161 00:09:17,800 --> 00:09:21,280 Speaker 1: activist investor. Tell us about that, well, I mean a 162 00:09:21,320 --> 00:09:25,120 Speaker 1: lot of the stocks that he bought were exceptionally cheap 163 00:09:25,320 --> 00:09:27,440 Speaker 1: on a balance sheet basis, and he writes about that, 164 00:09:27,520 --> 00:09:29,680 Speaker 1: you know that he likes these you know, net nets 165 00:09:29,679 --> 00:09:33,360 Speaker 1: where like the cash and and you know, the current 166 00:09:33,360 --> 00:09:38,280 Speaker 1: assets exceed all the liability classic value investing by ten 167 00:09:38,360 --> 00:09:41,760 Speaker 1: dollars for eight bucks over the long run. Yeah, and 168 00:09:41,800 --> 00:09:46,000 Speaker 1: I mean ultimately when you find those situations, like you know, 169 00:09:46,080 --> 00:09:48,319 Speaker 1: the market like it's not always done, like a lot 170 00:09:48,360 --> 00:09:52,520 Speaker 1: of times it has that valuation because of a governance problem. 171 00:09:52,559 --> 00:09:56,360 Speaker 1: And very early in his career he found the Northern 172 00:09:56,400 --> 00:09:59,360 Speaker 1: Pipeline company that's in my book, where like it was 173 00:09:59,559 --> 00:10:02,720 Speaker 1: a trade in the mid sixties, and he discovered that, 174 00:10:02,800 --> 00:10:06,400 Speaker 1: you know, they had over ninety dollars per share in 175 00:10:06,480 --> 00:10:09,440 Speaker 1: liquid bonds. In other words, they held securities that were 176 00:10:09,440 --> 00:10:12,360 Speaker 1: worth more on a pre share basis, you know, than 177 00:10:12,400 --> 00:10:17,079 Speaker 1: the whole company. Sounds a little bit like Yahoo today, Yeah, exactly. 178 00:10:17,679 --> 00:10:20,320 Speaker 1: And um, you know, like with like with Yahoo, there's 179 00:10:20,320 --> 00:10:22,840 Speaker 1: a discount because of the tax problem, but there was 180 00:10:22,880 --> 00:10:25,559 Speaker 1: also in that stock and lots of other stocks, there 181 00:10:25,640 --> 00:10:30,560 Speaker 1: was a governance discount. And like with Northern Pipeline, he thought, well, 182 00:10:30,559 --> 00:10:33,640 Speaker 1: this is easy. I'll go explain to this company, you 183 00:10:34,160 --> 00:10:38,160 Speaker 1: have all this cash, just like return it to the shareholders, 184 00:10:38,200 --> 00:10:41,079 Speaker 1: like you know, we'll all retain our ownership and your 185 00:10:41,120 --> 00:10:44,600 Speaker 1: good company and we'll go from there, and they you know, 186 00:10:44,679 --> 00:10:47,840 Speaker 1: they showed him the door. And let's let's you say 187 00:10:47,920 --> 00:10:50,360 Speaker 1: they the some of the folks who were on the 188 00:10:50,400 --> 00:10:53,440 Speaker 1: other side of the table included some pretty big names 189 00:10:53,440 --> 00:10:56,160 Speaker 1: in the history of finance. Yeah. Well, the company was 190 00:10:56,200 --> 00:10:59,720 Speaker 1: a part of you know, like the Standard Oil Company, 191 00:10:59,720 --> 00:11:03,040 Speaker 1: which is owned by by you know, the Rockefellers, small 192 00:11:03,080 --> 00:11:05,800 Speaker 1: little group that hadn't pasked a couple of a couple 193 00:11:05,800 --> 00:11:07,960 Speaker 1: of dollars and a couple of shares of stock. Yeah, 194 00:11:08,000 --> 00:11:10,920 Speaker 1: so when they broke apart, like the monopoly, you know, 195 00:11:11,000 --> 00:11:13,120 Speaker 1: like they had a whole bunch of public companies. They 196 00:11:13,160 --> 00:11:16,680 Speaker 1: were there were eight pipeline companies and you know, by 197 00:11:16,760 --> 00:11:20,200 Speaker 1: the enties when Ben Graham began to poke around all 198 00:11:20,240 --> 00:11:23,880 Speaker 1: of these things like we're very over capitalized, had these 199 00:11:23,880 --> 00:11:26,920 Speaker 1: boards that like, we're not that engaged. And then their 200 00:11:26,920 --> 00:11:30,679 Speaker 1: biggest holder is the Rockefeller Foundation, who at the time 201 00:11:30,760 --> 00:11:33,880 Speaker 1: had a policy like to not get involved in the 202 00:11:33,920 --> 00:11:38,120 Speaker 1: operations of their shareholdings. But but meanwhile, you have this pipeline, 203 00:11:38,200 --> 00:11:42,400 Speaker 1: Northern Pipeline, trading at sixty five So so why couldn't 204 00:11:42,400 --> 00:11:46,719 Speaker 1: Graham just quietly continue to accumulate as much of the 205 00:11:46,840 --> 00:11:51,400 Speaker 1: ninety plus dollar per share company plus the operating company 206 00:11:51,400 --> 00:11:54,600 Speaker 1: at sixty five and and not say anything and assume 207 00:11:54,679 --> 00:11:58,000 Speaker 1: eventually the market would figure it out. Yeah, I mean 208 00:11:58,040 --> 00:12:01,360 Speaker 1: I think that ultimately he thought that he like he 209 00:12:01,480 --> 00:12:04,560 Speaker 1: possibly could do that, but you know, like the answer 210 00:12:04,640 --> 00:12:07,160 Speaker 1: there was for them to return that cash, you know. 211 00:12:07,320 --> 00:12:09,920 Speaker 1: So so you know, so he quietly bought all that 212 00:12:10,000 --> 00:12:13,600 Speaker 1: he could until he reached his position limit and then 213 00:12:13,679 --> 00:12:16,280 Speaker 1: nothing happened. What was his position limit? Well, he was 214 00:12:16,320 --> 00:12:18,680 Speaker 1: a very diversified investor, so he's not going to have 215 00:12:18,720 --> 00:12:22,960 Speaker 1: a concentrated portfolio. That's you would you would think you 216 00:12:22,960 --> 00:12:25,439 Speaker 1: could today, you could raise a fund and just accumulate 217 00:12:25,800 --> 00:12:29,839 Speaker 1: Northern Pipeline at stars with ninety dollars and yeah exactly, 218 00:12:30,040 --> 00:12:32,760 Speaker 1: But like you know, it never was his m to 219 00:12:33,080 --> 00:12:35,600 Speaker 1: like to buy to get control. So is that why 220 00:12:36,080 --> 00:12:39,160 Speaker 1: even when when things worked out with Northern Pipeline, it 221 00:12:39,160 --> 00:12:42,280 Speaker 1: really didn't impact is a fund all that much? Well, 222 00:12:42,320 --> 00:12:43,880 Speaker 1: I mean it did in the sense it was a 223 00:12:43,880 --> 00:12:47,680 Speaker 1: big home run and it helped his returns. It taught 224 00:12:47,760 --> 00:12:51,000 Speaker 1: him about activism and governance and and and he did 225 00:12:51,160 --> 00:12:54,000 Speaker 1: like a lot of activism after that. Like, but ultimately 226 00:12:54,559 --> 00:12:57,199 Speaker 1: it was not like the investors that you see today 227 00:12:57,280 --> 00:12:59,160 Speaker 1: that will have a third of their of their fund 228 00:12:59,200 --> 00:13:00,719 Speaker 1: in one stock and then it's a big home run. 229 00:13:00,840 --> 00:13:03,559 Speaker 1: So so what was the outcome with the Rockefellers in 230 00:13:03,559 --> 00:13:06,600 Speaker 1: the Northern Pipeline. How did they resolve this? We are 231 00:13:06,640 --> 00:13:09,600 Speaker 1: an operating company, plus we have ninety dollars per share 232 00:13:09,720 --> 00:13:13,760 Speaker 1: in marketable security. Well, I mean it was a long slaga. 233 00:13:13,880 --> 00:13:17,800 Speaker 1: So at first, like they basically told him to go away. 234 00:13:18,280 --> 00:13:20,800 Speaker 1: He takes the train all the way out like, uh, 235 00:13:20,960 --> 00:13:23,160 Speaker 1: you know, to Pittsburgh for the annual meeting, and like 236 00:13:23,200 --> 00:13:25,559 Speaker 1: he tells him that he's like prepared like a statement, 237 00:13:25,559 --> 00:13:28,080 Speaker 1: and they tell him, while, you're welcome to come and 238 00:13:28,080 --> 00:13:30,840 Speaker 1: and he gets up to give the statement, and the 239 00:13:30,920 --> 00:13:33,400 Speaker 1: chairman asked, um, you know, would you like to make 240 00:13:33,440 --> 00:13:35,480 Speaker 1: a motion? And he said, so yes, I would like 241 00:13:36,080 --> 00:13:39,320 Speaker 1: like to motion to give my statement. And the chairman asked, well, 242 00:13:39,440 --> 00:13:42,440 Speaker 1: is anyone here uh to second that motion? And he 243 00:13:42,440 --> 00:13:44,920 Speaker 1: didn't bring anyone and so no one seconded the motion. 244 00:13:44,960 --> 00:13:46,720 Speaker 1: He had to go all the way back to Latina 245 00:13:46,800 --> 00:13:50,360 Speaker 1: to New York. But but by doing that they really 246 00:13:50,400 --> 00:13:53,200 Speaker 1: made him angry. And so by the next year he 247 00:13:53,320 --> 00:13:55,920 Speaker 1: was extremely prepared. He ran a whole proxy fight. He 248 00:13:56,000 --> 00:13:59,839 Speaker 1: won the proxy fight. He behind the scenes, through a 249 00:14:00,080 --> 00:14:03,000 Speaker 1: very good letter that's in my book, he you know, 250 00:14:03,240 --> 00:14:07,560 Speaker 1: ultimately convinced the rocket Fellers that the right thing to 251 00:14:07,640 --> 00:14:10,240 Speaker 1: do here was to distribute this cash. And so not 252 00:14:10,400 --> 00:14:14,000 Speaker 1: only did that happen at the Northern Pipeline Company, but 253 00:14:14,160 --> 00:14:18,400 Speaker 1: after this episode, the Rockefellers pushed all of the other 254 00:14:18,440 --> 00:14:21,520 Speaker 1: pipelines to return their excess cash. So he really had 255 00:14:21,560 --> 00:14:26,960 Speaker 1: a significant impact on on shareholder value and activism. I mean, 256 00:14:27,000 --> 00:14:29,160 Speaker 1: I'm not sure, because I do think that all of 257 00:14:29,160 --> 00:14:31,760 Speaker 1: this was very under the radar, Like I mean it 258 00:14:31,800 --> 00:14:34,280 Speaker 1: was not I mean, it wasn't on Twitter. I mean, 259 00:14:34,280 --> 00:14:37,360 Speaker 1: it wasn't even in the newspaper like it's funny, And 260 00:14:37,440 --> 00:14:40,520 Speaker 1: there was no financial press that covered this at all. Yeah, 261 00:14:40,560 --> 00:14:42,600 Speaker 1: So when I did my book, I looked at all 262 00:14:42,640 --> 00:14:45,280 Speaker 1: of the old proxy fights, and you know, there were 263 00:14:45,320 --> 00:14:48,680 Speaker 1: a few like you know, like the Central Leather nineteen 264 00:14:48,720 --> 00:14:51,800 Speaker 1: eleven that like had a very small article that's a 265 00:14:51,840 --> 00:14:55,960 Speaker 1: fascinating story. Also tell us about the Central Leather story. 266 00:14:56,240 --> 00:14:58,880 Speaker 1: Oh well, just that like their whole proxy fight there 267 00:14:59,680 --> 00:15:01,960 Speaker 1: and this got what big news was just for them 268 00:15:02,000 --> 00:15:07,360 Speaker 1: to disclose information better quarterly release your finances. How amazing 269 00:15:07,480 --> 00:15:09,800 Speaker 1: is that that if you went back that far, you 270 00:15:09,840 --> 00:15:13,440 Speaker 1: go back a century, companies didn't feel obligated to say, 271 00:15:13,520 --> 00:15:16,480 Speaker 1: by the way, here here's how much revenue we have, 272 00:15:16,640 --> 00:15:18,800 Speaker 1: and here's how much profit we have, and here's what 273 00:15:18,800 --> 00:15:22,200 Speaker 1: we spent money on. Companies did not even release that now, 274 00:15:22,400 --> 00:15:25,080 Speaker 1: and in the Ben Graham case, it's not clear that 275 00:15:25,120 --> 00:15:28,960 Speaker 1: the that the Rockefellers even knew how cash rich the 276 00:15:28,960 --> 00:15:32,800 Speaker 1: pipeline companies were, and so like it opened their eyes 277 00:15:32,840 --> 00:15:37,880 Speaker 1: to that. So Warren Buffett famously one of Ben Graham's proteges. 278 00:15:38,120 --> 00:15:40,840 Speaker 1: He had a big impact when he was an activist 279 00:15:41,280 --> 00:15:45,200 Speaker 1: in the way companies deal with activists and even how 280 00:15:45,240 --> 00:15:49,120 Speaker 1: their structured legally. What happened with with Buffett, Well, you know, 281 00:15:49,200 --> 00:15:51,960 Speaker 1: so Buffett in his early career, I mean, well, first 282 00:15:52,000 --> 00:15:54,200 Speaker 1: of all, you know, he worked for Ben Graham, and 283 00:15:54,360 --> 00:15:56,800 Speaker 1: you know, so he worked at the Graham Newman shop 284 00:15:56,880 --> 00:15:59,760 Speaker 1: that did lots of proxy fights and did lots of activism. 285 00:15:59,800 --> 00:16:01,840 Speaker 1: And when he began his own fund in in the 286 00:16:01,840 --> 00:16:05,880 Speaker 1: mid nineteen fifties in Omaha, he also did lots of 287 00:16:05,880 --> 00:16:09,160 Speaker 1: buying big stakes in public companies, you know, joining like 288 00:16:09,240 --> 00:16:13,360 Speaker 1: the boards and ultimately breaking apart the companies are driving 289 00:16:13,440 --> 00:16:16,520 Speaker 1: them to you know, improve profits. And so he did 290 00:16:16,520 --> 00:16:21,440 Speaker 1: buy lots of these like declining, mature, undervalued businesses. If 291 00:16:21,440 --> 00:16:24,760 Speaker 1: you look at Berkshire Hathaway, that's effectively what happened there. 292 00:16:24,800 --> 00:16:28,120 Speaker 1: Like it was a terrible like declining business, but it 293 00:16:28,200 --> 00:16:31,320 Speaker 1: was a net net. He bought control of it and 294 00:16:31,320 --> 00:16:35,520 Speaker 1: he ultimately like began to use their cash and they're 295 00:16:35,560 --> 00:16:39,600 Speaker 1: declining cash flow to invest in other businesses. I'm Barry Ridholts. 296 00:16:39,680 --> 00:16:42,960 Speaker 1: You're listening to Masters in Business on Bloomberg Radio. My 297 00:16:43,040 --> 00:16:45,600 Speaker 1: guest today is Jeff Graham. He is the author of 298 00:16:45,600 --> 00:16:48,760 Speaker 1: the book Dear Chairman and which is all about activist 299 00:16:48,880 --> 00:16:52,920 Speaker 1: investing and how things have changed in the world of 300 00:16:53,000 --> 00:16:57,479 Speaker 1: corporate governance. He also is an adjunct professor at Columbia University. 301 00:16:58,320 --> 00:17:01,720 Speaker 1: So you run of funds and you you know what 302 00:17:01,760 --> 00:17:06,080 Speaker 1: it's like to have investors who are looking over your shoulder. 303 00:17:06,720 --> 00:17:11,160 Speaker 1: How do you deal with that in a concentrated portfolio? Yeah, 304 00:17:11,200 --> 00:17:13,919 Speaker 1: I mean, how do I deal with the investors, like, 305 00:17:14,000 --> 00:17:17,040 Speaker 1: you know, in my fund or in our target companies? Both? 306 00:17:17,119 --> 00:17:19,920 Speaker 1: Let's let's let's take both. First, do you have your 307 00:17:19,920 --> 00:17:23,640 Speaker 1: own investors's writing you ye do your chairman like, Yeah, 308 00:17:23,720 --> 00:17:26,320 Speaker 1: I mean, ultimately, I think it probably has a lot 309 00:17:26,400 --> 00:17:29,399 Speaker 1: in common with being a public company CEO in that 310 00:17:29,640 --> 00:17:33,120 Speaker 1: like you have to communicate your strategy, Explain to them 311 00:17:33,200 --> 00:17:36,600 Speaker 1: exactly what you're doing, Explain to them how you think 312 00:17:36,600 --> 00:17:39,000 Speaker 1: about things, and so when things will do go wrong, 313 00:17:39,040 --> 00:17:41,000 Speaker 1: if you have a bad quarter or a bad year, 314 00:17:41,640 --> 00:17:44,439 Speaker 1: you know they can understand it. And I think that 315 00:17:44,800 --> 00:17:47,760 Speaker 1: like that because ultimately an important job of a public 316 00:17:47,760 --> 00:17:50,320 Speaker 1: company CEO two is like you have to like to 317 00:17:50,440 --> 00:17:54,080 Speaker 1: keep your shareholders informed about, you know, how you operate. 318 00:17:54,119 --> 00:17:57,080 Speaker 1: You can't guarantee good results, but you can at least say, 319 00:17:57,359 --> 00:17:59,560 Speaker 1: here's our process, here's what we're doing, and we want 320 00:17:59,600 --> 00:18:02,440 Speaker 1: you to un uderstand and look, I mean, in value investing, 321 00:18:02,480 --> 00:18:04,400 Speaker 1: like you're never going to have a great year every year, 322 00:18:04,680 --> 00:18:08,400 Speaker 1: that's right, because because by definition, you're buying those stubs, 323 00:18:08,400 --> 00:18:11,560 Speaker 1: those unloved things. And just because something's cheap doesn't mean 324 00:18:11,600 --> 00:18:13,840 Speaker 1: it can't get cheaper. It will get cheaper. So you 325 00:18:13,880 --> 00:18:17,040 Speaker 1: wrote yourself a dear chairman letter tell us about that. Yeah, 326 00:18:17,080 --> 00:18:20,040 Speaker 1: my first one. It was um in the early two 327 00:18:20,080 --> 00:18:22,679 Speaker 1: thousand's at my very first job, you know, which was 328 00:18:23,200 --> 00:18:25,280 Speaker 1: like the early years of the hedge fund business, and 329 00:18:25,359 --> 00:18:27,119 Speaker 1: so it was like a little bit of a crazier 330 00:18:27,600 --> 00:18:30,400 Speaker 1: you know, more like the wild West, you know. So 331 00:18:31,000 --> 00:18:35,840 Speaker 1: so the evolution of that is that today, post two thousand, 332 00:18:35,840 --> 00:18:38,800 Speaker 1: there's ten thousand hedge funds, but for a long time 333 00:18:38,840 --> 00:18:41,159 Speaker 1: there was only a handful of funds. There was some 334 00:18:41,200 --> 00:18:45,440 Speaker 1: pretty well known guys, and that exploded around post dot 335 00:18:45,480 --> 00:18:47,720 Speaker 1: com period. I think it's also it's just a more 336 00:18:47,920 --> 00:18:51,600 Speaker 1: mature and process oriented business. I think that when I 337 00:18:51,640 --> 00:18:54,560 Speaker 1: began in it, I was just out of business school. 338 00:18:54,640 --> 00:18:56,400 Speaker 1: I didn't know what I was doing, and I got 339 00:18:56,440 --> 00:18:58,400 Speaker 1: and I mean I wrote a thirt d letter well 340 00:18:58,440 --> 00:19:00,639 Speaker 1: to like a like a pretty big of the company, 341 00:19:00,920 --> 00:19:04,919 Speaker 1: the Denny's Corporation, the Moon's over Miami people, And I 342 00:19:04,960 --> 00:19:07,399 Speaker 1: just think that like that back then it was just like, 343 00:19:07,480 --> 00:19:09,480 Speaker 1: you know, it was a little bit of a of 344 00:19:09,520 --> 00:19:11,920 Speaker 1: a of a crazier time in the business. But they 345 00:19:12,000 --> 00:19:16,000 Speaker 1: had had some problems and they had tried to kind 346 00:19:16,000 --> 00:19:19,280 Speaker 1: of expand their like their lunch and dinner business and 347 00:19:19,280 --> 00:19:23,080 Speaker 1: and had neglected to advertise their breakfast business. It hurt 348 00:19:23,119 --> 00:19:25,720 Speaker 1: their results. And there, I mean I think of Denny's 349 00:19:25,720 --> 00:19:28,480 Speaker 1: and I think of breakfast. Yeah, So how did that 350 00:19:28,600 --> 00:19:31,240 Speaker 1: Did you influence that chain? Are you? Are you the 351 00:19:31,280 --> 00:19:34,640 Speaker 1: reason why we have Denny's Breakfast all day? I think 352 00:19:34,720 --> 00:19:38,040 Speaker 1: I played a role in them. Were not doing a 353 00:19:38,119 --> 00:19:40,840 Speaker 1: restructuring in in the early two thousand's, you know, so 354 00:19:40,880 --> 00:19:44,119 Speaker 1: we basically it was a cheap stock because it was 355 00:19:44,200 --> 00:19:47,879 Speaker 1: highly overleveraged. And like you, I mean, like you rarely 356 00:19:47,880 --> 00:19:51,560 Speaker 1: see this as often, but it was a situation where 357 00:19:51,720 --> 00:19:57,159 Speaker 1: on an enterprise basis, the company was extremely undervalued, you know, 358 00:19:57,280 --> 00:20:00,160 Speaker 1: where if you could deliver it like then you could 359 00:20:00,160 --> 00:20:03,159 Speaker 1: be realized. Yeah, you know that stuff tends to be 360 00:20:03,160 --> 00:20:05,440 Speaker 1: a lot more priced in these days, I would imagine. 361 00:20:05,960 --> 00:20:09,400 Speaker 1: So when you come across a situation these days where 362 00:20:09,880 --> 00:20:12,760 Speaker 1: there is an undervalued company, the market is miss pricing it, 363 00:20:13,119 --> 00:20:15,840 Speaker 1: and you want management to do something, how do you 364 00:20:15,840 --> 00:20:19,120 Speaker 1: go about writing that, dear chairman? Like yeah, I mean 365 00:20:20,160 --> 00:20:22,879 Speaker 1: in in a funny way, even though I wrote a 366 00:20:22,880 --> 00:20:26,320 Speaker 1: book about it. Um, the age of the deer chairman 367 00:20:26,440 --> 00:20:28,840 Speaker 1: letter is kind of passing. Like you go meet with 368 00:20:28,880 --> 00:20:31,399 Speaker 1: the management, and you and and you meet with the board, 369 00:20:31,480 --> 00:20:33,320 Speaker 1: and you have a conversation with him, and you meet 370 00:20:33,320 --> 00:20:36,960 Speaker 1: with the other shareholders. You know, back then, like you're 371 00:20:37,000 --> 00:20:40,240 Speaker 1: more trying to persuade the shareholder base. And so at 372 00:20:40,280 --> 00:20:44,280 Speaker 1: that time, like the Denny's board was considering doing a 373 00:20:44,320 --> 00:20:48,080 Speaker 1: restructuring to equitize their debt, and you know, so we 374 00:20:48,119 --> 00:20:51,000 Speaker 1: had to Yeah, you know so we had to commence 375 00:20:51,000 --> 00:20:53,639 Speaker 1: the board. No, like, you're doing fine. If you need 376 00:20:53,680 --> 00:20:55,840 Speaker 1: to raise a capital, like, you should do it well 377 00:20:55,880 --> 00:20:59,320 Speaker 1: from the stockholders. And by doing that in a like 378 00:20:59,359 --> 00:21:03,320 Speaker 1: in a public a fashion, like it also got the 379 00:21:03,400 --> 00:21:06,760 Speaker 1: stockholders behind the idea. That makes a lot of sense. 380 00:21:07,280 --> 00:21:10,200 Speaker 1: So let's talk about some of the quotes from the book. 381 00:21:10,200 --> 00:21:13,800 Speaker 1: And I really like this. In normal market conditions, if 382 00:21:13,840 --> 00:21:17,159 Speaker 1: I find a good company a cheap valuation, it tends 383 00:21:17,200 --> 00:21:20,840 Speaker 1: to have governance problems. Is that still true today? I 384 00:21:20,880 --> 00:21:23,760 Speaker 1: think that's true. And I mean that was a statement 385 00:21:23,800 --> 00:21:25,680 Speaker 1: that I made in the introduction of the book, where 386 00:21:25,720 --> 00:21:28,639 Speaker 1: like I'm kind of explaining who I am and explaining 387 00:21:28,680 --> 00:21:30,879 Speaker 1: the voice of the book. And you know, I'm a 388 00:21:30,920 --> 00:21:34,399 Speaker 1: value investor. I look for cheap stocks, and especially in 389 00:21:34,440 --> 00:21:37,679 Speaker 1: the market like today's, it's hard to find a cheap stock, 390 00:21:37,760 --> 00:21:40,600 Speaker 1: and if you do find one, it's often because there's 391 00:21:40,840 --> 00:21:43,920 Speaker 1: an issue with how they're run. It's cheap for a reason. Yeah, 392 00:21:44,560 --> 00:21:47,240 Speaker 1: that makes sense. And what's the difference in management at 393 00:21:47,240 --> 00:21:50,679 Speaker 1: a large company versus a small company when it comes 394 00:21:50,680 --> 00:21:54,280 Speaker 1: to these governance issues. I mean, I guess, like from 395 00:21:54,320 --> 00:21:58,359 Speaker 1: you know, from my experience, am I generally believed that, like, 396 00:21:58,440 --> 00:22:01,959 Speaker 1: the larger companies tend to have higher quality boards, and 397 00:22:02,040 --> 00:22:05,480 Speaker 1: they tend to be just like to have higher caliber 398 00:22:06,040 --> 00:22:09,480 Speaker 1: CEOs and boards of directors. And you know, that is 399 00:22:09,520 --> 00:22:13,119 Speaker 1: both intuitive and counterintuitive because like in some ways that 400 00:22:13,240 --> 00:22:15,520 Speaker 1: you would think, well, at these you know, well, Nitchie, 401 00:22:15,560 --> 00:22:19,080 Speaker 1: small companies like you might have these CEOs like who 402 00:22:19,080 --> 00:22:21,959 Speaker 1: really know the business, you know, But generally the bigger 403 00:22:22,000 --> 00:22:25,000 Speaker 1: the company, the stronger the board. I think, all right, 404 00:22:25,080 --> 00:22:28,840 Speaker 1: let's get back to the activist investor question. And I 405 00:22:28,920 --> 00:22:33,080 Speaker 1: like the example we we talked earlier about Central Leather 406 00:22:33,640 --> 00:22:37,640 Speaker 1: js Bach eventually is at Prudential Base. Is that where 407 00:22:37,680 --> 00:22:39,960 Speaker 1: they ended up? I don't know. I think that's that, 408 00:22:40,080 --> 00:22:43,080 Speaker 1: if memory serves, I think they eventually became part of that. 409 00:22:43,400 --> 00:22:47,480 Speaker 1: They wanted a representation on the board merely to get 410 00:22:47,640 --> 00:22:52,880 Speaker 1: quarterly financial updates to shareholders. That almost seems quaint compared 411 00:22:52,920 --> 00:22:55,359 Speaker 1: to what what takes place today. So what was the 412 00:22:55,400 --> 00:22:58,440 Speaker 1: result of that bit of shareholder activism. Well, I mean 413 00:22:58,520 --> 00:23:02,320 Speaker 1: in the very early days, um activism. I mean, if 414 00:23:02,359 --> 00:23:05,960 Speaker 1: it was you know, well from a financial investors well, 415 00:23:06,000 --> 00:23:08,000 Speaker 1: guys like Ben Graham. Well, first of all, there was 416 00:23:08,000 --> 00:23:10,400 Speaker 1: not that much of that, and and second of all, 417 00:23:10,680 --> 00:23:14,439 Speaker 1: it tended to always be about you know, financial issues, 418 00:23:14,520 --> 00:23:19,840 Speaker 1: well financial disclosure or capital allocation. And really like you 419 00:23:19,920 --> 00:23:24,240 Speaker 1: saw a beginning in in the nineteen fifties with the 420 00:23:24,440 --> 00:23:27,920 Speaker 1: proxy tier movement that was a very big shareholder activism 421 00:23:28,080 --> 00:23:31,480 Speaker 1: in other words, getting actual other shareholders to vote the 422 00:23:31,520 --> 00:23:35,080 Speaker 1: way the activists wanted in order the force management to 423 00:23:35,080 --> 00:23:36,840 Speaker 1: do what they wanted to do. Yeah, I mean in 424 00:23:37,160 --> 00:23:40,240 Speaker 1: the proxy tier era, it evolved you know, to a 425 00:23:40,280 --> 00:23:44,200 Speaker 1: lot more operating issues and the kind of activism that 426 00:23:44,240 --> 00:23:46,720 Speaker 1: you see today. I mean, I remember there was in 427 00:23:47,480 --> 00:23:49,399 Speaker 1: like in the chapter in the book that's about the 428 00:23:49,440 --> 00:23:52,560 Speaker 1: proxy fight for the New York Central. Uh, the activist 429 00:23:52,600 --> 00:23:55,680 Speaker 1: even talks about like the nature of their passenger trains 430 00:23:55,720 --> 00:23:57,800 Speaker 1: and like like like that they needed to build like 431 00:23:57,840 --> 00:24:01,760 Speaker 1: a lightweight train. You know. So things evolved up you know, 432 00:24:01,800 --> 00:24:06,320 Speaker 1: well pretty quickly. I'm I'm away from the pure financial activist. 433 00:24:06,520 --> 00:24:08,879 Speaker 1: So you raise a really interesting point there, and I'm 434 00:24:08,920 --> 00:24:11,320 Speaker 1: gonna go to a quote from your book, the key 435 00:24:11,359 --> 00:24:15,400 Speaker 1: issue in an activist campaign often boils down to who 436 00:24:15,440 --> 00:24:18,680 Speaker 1: will do a better job running the company, a professional 437 00:24:18,720 --> 00:24:23,399 Speaker 1: management team and their board with little accountability, or a 438 00:24:23,440 --> 00:24:26,760 Speaker 1: financial investor looking out for his or her own And 439 00:24:26,800 --> 00:24:30,080 Speaker 1: I'm going to add the word short term interests, so 440 00:24:30,400 --> 00:24:35,360 Speaker 1: that to me, that's really a fascinating issue, a fascinating 441 00:24:35,680 --> 00:24:39,439 Speaker 1: seat of opposed interests. Yeah, and I think in the 442 00:24:39,480 --> 00:24:43,040 Speaker 1: ideal world, like you want the activists a shareholders like 443 00:24:43,440 --> 00:24:45,840 Speaker 1: well to be long term oriented, and like you do 444 00:24:45,960 --> 00:24:48,600 Speaker 1: want them all to work together. It doesn't always happen 445 00:24:48,680 --> 00:24:50,680 Speaker 1: that way now, And lots of times, like if you're 446 00:24:50,880 --> 00:24:53,800 Speaker 1: a passive shareholder and there's an activist, like the activists, 447 00:24:54,080 --> 00:24:56,560 Speaker 1: you know, wants to sell the company, and so like 448 00:24:56,640 --> 00:24:59,399 Speaker 1: you're deciding, like who's right here? And I was, I 449 00:24:59,400 --> 00:25:03,040 Speaker 1: will perfectly. Example was the Carli Con activism with Apple. 450 00:25:03,320 --> 00:25:05,480 Speaker 1: Here's a company on its way to becoming the most 451 00:25:05,560 --> 00:25:08,879 Speaker 1: valuable company in the world. They dented the universe, to 452 00:25:09,000 --> 00:25:13,159 Speaker 1: quote Steve Jobs, and invented not one or two, but 453 00:25:13,280 --> 00:25:18,800 Speaker 1: a number of technologies that were completely innovative, game changing, 454 00:25:19,600 --> 00:25:22,960 Speaker 1: altering the landscape. Really, what does a guy who bought 455 00:25:22,960 --> 00:25:25,679 Speaker 1: a few million shares of Apple. Have to say about 456 00:25:26,400 --> 00:25:30,359 Speaker 1: innovation technology running a company. I was always very struck 457 00:25:30,400 --> 00:25:33,840 Speaker 1: at the u briss of I know, how you should 458 00:25:33,880 --> 00:25:36,920 Speaker 1: be running this company better than you do. Yeah. Does 459 00:25:36,960 --> 00:25:40,199 Speaker 1: that come up frequently with with activists or yeah, I 460 00:25:40,200 --> 00:25:43,520 Speaker 1: mean I think that's like the whole issue is like that. Ultimately, 461 00:25:44,119 --> 00:25:47,720 Speaker 1: it like it takes a lot of hubrists, like you know, 462 00:25:47,840 --> 00:25:52,600 Speaker 1: because as investors, we are working off of extremely limited information. 463 00:25:52,720 --> 00:25:55,679 Speaker 1: You know, we know less than the board and the 464 00:25:55,720 --> 00:26:00,400 Speaker 1: management knows about the business often and so like they 465 00:26:00,440 --> 00:26:04,080 Speaker 1: do have to have this confidence that like their ideas 466 00:26:04,200 --> 00:26:07,879 Speaker 1: are right even when they do tend to have less information. 467 00:26:07,920 --> 00:26:09,760 Speaker 1: But it's not always black and white, like I mean, 468 00:26:09,800 --> 00:26:13,280 Speaker 1: even in that Carli con case, Like on the one hand, 469 00:26:13,320 --> 00:26:18,520 Speaker 1: like you have the most successful company in history arguably, 470 00:26:18,600 --> 00:26:21,399 Speaker 1: like I mean, like they're in I mean, they're in 471 00:26:21,440 --> 00:26:24,800 Speaker 1: a very hard commodity business and they've built you know 472 00:26:24,840 --> 00:26:28,639 Speaker 1: what will right now is like the most valuable company 473 00:26:28,640 --> 00:26:30,960 Speaker 1: in the world. That's an insane achievement. Not only that, 474 00:26:31,000 --> 00:26:34,480 Speaker 1: when you look at the mobile smartphone, something that if 475 00:26:34,480 --> 00:26:36,800 Speaker 1: they didn't invent, they certainly took to a different level. 476 00:26:37,200 --> 00:26:39,800 Speaker 1: They capture something like four to five cents. It used 477 00:26:39,840 --> 00:26:42,119 Speaker 1: to be eight out of ninth cents of profit in 478 00:26:42,119 --> 00:26:46,280 Speaker 1: that space. My favorite stat about Apple is Samsung set 479 00:26:46,440 --> 00:26:49,320 Speaker 1: makes more selling chips to Apple for each phone that 480 00:26:49,480 --> 00:26:53,440 Speaker 1: Apple cells than they do on their own Galaxy. So 481 00:26:53,880 --> 00:26:55,840 Speaker 1: for someone to come along and say, all right, nice 482 00:26:55,920 --> 00:26:58,480 Speaker 1: job guys, so far, but I'll take it from here, 483 00:26:59,040 --> 00:27:02,399 Speaker 1: that's really a lot out of But I mean, is 484 00:27:02,440 --> 00:27:05,080 Speaker 1: he clearly wrong. I mean, if you believe in the 485 00:27:05,119 --> 00:27:09,840 Speaker 1: business will long term, if you believe in the management, like, 486 00:27:10,119 --> 00:27:12,560 Speaker 1: is he wrong to say, look, you're crazily I mean, 487 00:27:12,760 --> 00:27:16,400 Speaker 1: you know, you're crazily over capitalized. Perhaps you should buy 488 00:27:16,400 --> 00:27:19,080 Speaker 1: back some shares. It's unique in the history for some 489 00:27:19,160 --> 00:27:21,520 Speaker 1: company to be sitting with two hundred bill or at 490 00:27:21,560 --> 00:27:23,639 Speaker 1: the time, at the time it was a hundred billion, 491 00:27:23,720 --> 00:27:26,239 Speaker 1: now it's two hundred billion. Yeah, And so you know 492 00:27:26,320 --> 00:27:29,080 Speaker 1: they're incentives like you know that like that Icon wants 493 00:27:29,080 --> 00:27:31,840 Speaker 1: the stock to go up, and you know the management 494 00:27:31,920 --> 00:27:35,080 Speaker 1: probably wants that two hundred billion uh to play with 495 00:27:35,240 --> 00:27:37,160 Speaker 1: or like to do whatever you know they want with 496 00:27:37,400 --> 00:27:40,919 Speaker 1: like you as the shareholder, it's not just completely obvious 497 00:27:41,000 --> 00:27:43,280 Speaker 1: who's right and who's wrong there, And it depends on 498 00:27:43,359 --> 00:27:45,640 Speaker 1: your like on your long term view of the company, 499 00:27:45,640 --> 00:27:48,520 Speaker 1: and like your view of the valuation. We're talking with 500 00:27:48,760 --> 00:27:53,280 Speaker 1: Jeff Graham, author of Dear Chairman, The History of Activists Investing. 501 00:27:53,560 --> 00:27:57,520 Speaker 1: So so let's look at the current crop of activists. 502 00:27:57,960 --> 00:28:02,400 Speaker 1: You mentioned Carl icon Uh, Warren Buffett, Benjamin Graham, Ross Biro, 503 00:28:02,600 --> 00:28:06,399 Speaker 1: Dan Loebe. With the notable exception of Warren Buffett, the 504 00:28:06,480 --> 00:28:10,920 Speaker 1: investors in this book are static characters who undergo little 505 00:28:10,960 --> 00:28:15,920 Speaker 1: fundamental change. Why is that, Well, the book is about 506 00:28:15,960 --> 00:28:18,760 Speaker 1: this activists will movement. It's about how we got there, 507 00:28:18,760 --> 00:28:22,680 Speaker 1: It's about how it happened. Um. And ultimately, an activist 508 00:28:22,840 --> 00:28:26,359 Speaker 1: is a financial investor. Will you know, we'll trying to 509 00:28:26,440 --> 00:28:30,160 Speaker 1: make a profit on their investment in the company. And 510 00:28:30,760 --> 00:28:33,200 Speaker 1: you know, like the way that that those guys all 511 00:28:33,280 --> 00:28:36,800 Speaker 1: do it has changed over time, like because of a 512 00:28:36,800 --> 00:28:39,800 Speaker 1: lot of external factors, but ultimately, at their core, they 513 00:28:39,840 --> 00:28:43,560 Speaker 1: are still these economic actors out to make a buck. 514 00:28:43,920 --> 00:28:46,160 Speaker 1: And I think it's important as we look at this 515 00:28:46,280 --> 00:28:50,560 Speaker 1: history and as like we understand how public companies work. Um, 516 00:28:50,800 --> 00:28:54,040 Speaker 1: you know, will people attend to focus a lot on 517 00:28:54,080 --> 00:28:57,080 Speaker 1: the personalities of the activists, and will Bill Ackman and 518 00:28:57,160 --> 00:29:00,720 Speaker 1: David iron Horn. But but a lot of the movement 519 00:29:00,760 --> 00:29:04,560 Speaker 1: that you're seeing now is driven by the behind the scenes, 520 00:29:04,720 --> 00:29:07,600 Speaker 1: a passive investors, the people like a Vanguard or the 521 00:29:07,600 --> 00:29:10,160 Speaker 1: big pension fund. So let's let's talk about Van Good 522 00:29:10,680 --> 00:29:13,960 Speaker 1: said something publicly, So for those people who don't know, 523 00:29:14,440 --> 00:29:16,960 Speaker 1: I think in terms of the United States, Vanguard owns 524 00:29:17,040 --> 00:29:20,760 Speaker 1: one out of every five shares of every publicly traded company, 525 00:29:20,840 --> 00:29:23,920 Speaker 1: which is an insane number. And I heard you on 526 00:29:24,440 --> 00:29:27,760 Speaker 1: I saw a video online where you noted that Vanguard 527 00:29:27,800 --> 00:29:31,400 Speaker 1: has twenty two people on staff whose sole job it 528 00:29:31,560 --> 00:29:35,920 Speaker 1: is to vote the proxies for the companies they own. 529 00:29:36,160 --> 00:29:40,080 Speaker 1: So we all think of Vanguard as this passive company, 530 00:29:40,120 --> 00:29:42,480 Speaker 1: but really, if they want to de flex their muscles, 531 00:29:42,800 --> 00:29:47,320 Speaker 1: they're a very powerful player in corporate governance. Yeah. So, 532 00:29:47,440 --> 00:29:50,920 Speaker 1: I mean, like the big dynamic that you see in 533 00:29:50,920 --> 00:29:54,120 Speaker 1: this book is that like the history of activism has 534 00:29:54,160 --> 00:30:00,080 Speaker 1: been been sculpted by like like like this concentration and 535 00:30:00,200 --> 00:30:03,520 Speaker 1: institutional investors. Like that really began in the sixties with 536 00:30:04,000 --> 00:30:07,160 Speaker 1: the big pension funds, but then it kind of got 537 00:30:07,280 --> 00:30:12,360 Speaker 1: kicked into hyperdrive with with the index funds and indexation, 538 00:30:12,400 --> 00:30:16,960 Speaker 1: which is you know, Vanguard is a pretty old company. 539 00:30:17,040 --> 00:30:19,680 Speaker 1: But this is a pretty recent phenomenon. I mean even 540 00:30:19,760 --> 00:30:22,840 Speaker 1: well since the like the financial crisis, like you've seen 541 00:30:23,400 --> 00:30:27,840 Speaker 1: a dramatic increase and you know, like in these big 542 00:30:27,880 --> 00:30:35,520 Speaker 1: like a passive you know, institutions, Rock, the whole run 543 00:30:35,520 --> 00:30:38,680 Speaker 1: of stuff that has been what is Black Rock and 544 00:30:38,760 --> 00:30:44,080 Speaker 1: Vanguard or each they're like a huge you're add State 545 00:30:44,120 --> 00:30:46,000 Speaker 1: Street and one or two more and that's half the 546 00:30:46,080 --> 00:30:50,720 Speaker 1: tradeable shares and those um entities like have basically fallen 547 00:30:50,800 --> 00:30:55,640 Speaker 1: into the situation like where they are effectively the arbiters 548 00:30:55,680 --> 00:30:59,200 Speaker 1: of these hedge fund activist disputes and so like yeah, 549 00:30:59,200 --> 00:31:01,800 Speaker 1: like you'll see Bill a man in the headlines on 550 00:31:01,880 --> 00:31:06,000 Speaker 1: you know, Canadian Pacific or something. But like the people 551 00:31:06,160 --> 00:31:09,120 Speaker 1: that hold the votes are these big pension funds and 552 00:31:09,120 --> 00:31:13,440 Speaker 1: and and Vanguard behind the scenes, and their vote is 553 00:31:13,520 --> 00:31:18,520 Speaker 1: incredibly important and so they like are very um you know, 554 00:31:18,600 --> 00:31:21,680 Speaker 1: I mean, you know, they're more engaged than like then 555 00:31:21,720 --> 00:31:26,280 Speaker 1: people think in these issues, especially at the bigger cap companies. 556 00:31:26,520 --> 00:31:28,760 Speaker 1: Thank you Jeff for chatting with us. Can you stick 557 00:31:28,800 --> 00:31:31,560 Speaker 1: around for the podcast extras? Great We've been speaking with 558 00:31:31,640 --> 00:31:34,080 Speaker 1: Jeff Graham. He is the author of Dear Chairman, The 559 00:31:34,160 --> 00:31:37,280 Speaker 1: history of activist investors. Be sure and check out my 560 00:31:37,440 --> 00:31:41,320 Speaker 1: daily column on Bloomberg View dot com or follow me 561 00:31:41,360 --> 00:31:45,240 Speaker 1: on Twitter at Rid Halts. I'm Barry Rihults. You've been 562 00:31:45,320 --> 00:31:49,160 Speaker 1: listening to Masters in Business on Bloomberg Radio. Welcome to 563 00:31:49,200 --> 00:31:51,720 Speaker 1: the podcast. Actually, Jeff, thank you so much for doing this. 564 00:31:51,720 --> 00:31:55,440 Speaker 1: This is uh, this is really interesting. Before we continue 565 00:31:55,480 --> 00:31:58,920 Speaker 1: the questions, there's a funny little story I think we 566 00:31:58,960 --> 00:32:02,760 Speaker 1: should share. So, So, a couple of guys in my 567 00:32:02,840 --> 00:32:05,560 Speaker 1: office had read Dear Chairman. I keep calling it, by 568 00:32:05,600 --> 00:32:10,920 Speaker 1: the way, dear Mr Chairman. Lots of people do. It's 569 00:32:11,000 --> 00:32:14,800 Speaker 1: like a pretty snappy title, right, dear Mr chair Well, 570 00:32:14,800 --> 00:32:17,080 Speaker 1: because some of the letters are dear Mr Chairman. So 571 00:32:17,840 --> 00:32:21,120 Speaker 1: Ben Carlson is our head of Institutional Investing in and 572 00:32:21,200 --> 00:32:24,760 Speaker 1: he runs uh that division, and he had done a 573 00:32:24,760 --> 00:32:27,520 Speaker 1: blog post on this, and then Michael Batnick is my 574 00:32:27,520 --> 00:32:29,960 Speaker 1: head of research, and he had read the book. Both 575 00:32:29,960 --> 00:32:32,080 Speaker 1: of them liked it. So I kind of, you know, 576 00:32:32,280 --> 00:32:34,680 Speaker 1: I have a billion books in my que and I 577 00:32:34,760 --> 00:32:37,360 Speaker 1: read whatever is on fire, and I have to read. 578 00:32:37,720 --> 00:32:39,680 Speaker 1: So this was sort of like I knew of it, 579 00:32:39,720 --> 00:32:41,680 Speaker 1: and it was like, oh, that sounds kind of interesting. 580 00:32:41,680 --> 00:32:44,040 Speaker 1: Maybe I'll get to that, I get an email from 581 00:32:44,120 --> 00:32:48,000 Speaker 1: none other than Arthur Lovitt, former SEC chairman and a 582 00:32:48,080 --> 00:32:52,040 Speaker 1: previous guest on the show, not once, but twice, and 583 00:32:52,080 --> 00:32:53,680 Speaker 1: he says, I have a young man I'd like you 584 00:32:53,720 --> 00:32:57,120 Speaker 1: to meet um. He wrote this book, dear Mr Chairman. 585 00:32:57,160 --> 00:32:58,800 Speaker 1: And I'm like, why does that sound familiar? Oh? Of 586 00:32:58,800 --> 00:33:01,480 Speaker 1: course the book. And so I go back and you know, 587 00:33:01,520 --> 00:33:06,160 Speaker 1: I respond to um and and he mentioned he goes 588 00:33:06,200 --> 00:33:08,320 Speaker 1: by the way. He's the son of Phil Graham. And 589 00:33:08,360 --> 00:33:10,520 Speaker 1: I said, I'm interested in the book. I'd love to 590 00:33:10,560 --> 00:33:14,400 Speaker 1: speak with Jeff. But truth be told, you know, I 591 00:33:14,440 --> 00:33:17,560 Speaker 1: wrote Bail Out Nation. I was pretty critical of a 592 00:33:17,640 --> 00:33:21,800 Speaker 1: number of people, Robert Ruben, Bill Clinton, George Bush. But 593 00:33:21,880 --> 00:33:24,880 Speaker 1: I was pretty hard on on your dad. And I 594 00:33:24,920 --> 00:33:26,760 Speaker 1: wrote to Arthur. I said, I'm happy to talk to 595 00:33:27,640 --> 00:33:30,760 Speaker 1: That's right. I go full disclosure. I trashed his father, 596 00:33:30,920 --> 00:33:34,520 Speaker 1: pushed the commodity future modization actor. His name is on 597 00:33:34,680 --> 00:33:38,400 Speaker 1: Graham Bleach Leech blindly, which repealed Glass Stiegel. And so 598 00:33:38,480 --> 00:33:41,800 Speaker 1: I said, you know, full disclosure. I've I've been hard 599 00:33:41,800 --> 00:33:44,320 Speaker 1: on his dad. I called his mom all sorts of 600 00:33:44,320 --> 00:33:48,640 Speaker 1: things about and Ron blah blah blah. You know, how 601 00:33:48,640 --> 00:33:51,440 Speaker 1: do you suggest we handle this, so don't worry about it. 602 00:33:51,600 --> 00:33:55,960 Speaker 1: Arthur says, I'll make the introduction, all right. So I'm like, alright, Arthur, 603 00:33:56,160 --> 00:33:58,960 Speaker 1: who's Arthur might be one of the most charming people 604 00:33:59,240 --> 00:34:03,440 Speaker 1: and one of the finest human beings you'll you'll ever meet. 605 00:34:04,000 --> 00:34:07,040 Speaker 1: And so he takes that whole email where I I 606 00:34:07,200 --> 00:34:09,719 Speaker 1: lay out the you know, I've trashed his mom and 607 00:34:09,719 --> 00:34:12,160 Speaker 1: his dad. Are you sure this is comfortable? And he 608 00:34:12,239 --> 00:34:15,759 Speaker 1: just replies to me and copies you and I see 609 00:34:15,800 --> 00:34:18,600 Speaker 1: that and I'm like, oh no, Arthur, that is an 610 00:34:18,600 --> 00:34:21,680 Speaker 1: email foulx PA. And I scrolled down and here's and 611 00:34:21,719 --> 00:34:24,959 Speaker 1: there's nothing bad in the email. It was just hey, 612 00:34:25,000 --> 00:34:28,200 Speaker 1: you know, full disclosure. I don't wanna you know, I 613 00:34:28,200 --> 00:34:31,960 Speaker 1: don't want this this person walk into a room and 614 00:34:32,000 --> 00:34:35,680 Speaker 1: suddenly feel like he's being sandbagged. You should probably let 615 00:34:35,760 --> 00:34:39,040 Speaker 1: him know in a subtle way, not just here, I 616 00:34:39,080 --> 00:34:41,600 Speaker 1: have a look at this. Uh so you were you 617 00:34:41,640 --> 00:34:44,920 Speaker 1: were very gracious and said don't worry about it. I've heard. Well, 618 00:34:44,920 --> 00:34:48,480 Speaker 1: it's a funny situation because I think in like today's world, 619 00:34:48,520 --> 00:34:53,000 Speaker 1: like you realize, like if someone emails you like a 620 00:34:53,200 --> 00:34:56,320 Speaker 1: chain email, you probably are going to skim that change 621 00:34:56,400 --> 00:35:01,080 Speaker 1: of course, so Arthur is skim down like, huh, Like, 622 00:35:01,160 --> 00:35:03,520 Speaker 1: do I pretend I didn't see this? Well no, I 623 00:35:03,680 --> 00:35:06,920 Speaker 1: just like replied on like, hey, we're none taken. When 624 00:35:06,960 --> 00:35:09,040 Speaker 1: when I saw the email, it's all right, there's an 625 00:35:09,080 --> 00:35:10,719 Speaker 1: elephant in the room and we'll have to address it. 626 00:35:10,960 --> 00:35:15,399 Speaker 1: And fortunately you responded to that. It was actually very funny, Arthur, 627 00:35:15,440 --> 00:35:19,480 Speaker 1: if you're listening, reply all not the not the right 628 00:35:19,520 --> 00:35:21,839 Speaker 1: thing to uh, not the right thing to do, but 629 00:35:21,880 --> 00:35:26,440 Speaker 1: it was. Um. You know, in the day days of Google, 630 00:35:26,840 --> 00:35:30,280 Speaker 1: whatever you wrote is out there. I always google my guess. 631 00:35:30,760 --> 00:35:33,239 Speaker 1: I don't know if anybody is going to google me, 632 00:35:33,400 --> 00:35:37,440 Speaker 1: but if they did, hey, he's written stuff about Senator 633 00:35:37,520 --> 00:35:40,120 Speaker 1: Graham and your dad was in the public sphere and 634 00:35:40,520 --> 00:35:43,040 Speaker 1: I have a lifetime of think I've been doing that, 635 00:35:43,080 --> 00:35:45,560 Speaker 1: you know. I mean, he ran for president when I 636 00:35:45,560 --> 00:35:49,200 Speaker 1: was in college, So how was that. It was a 637 00:35:49,200 --> 00:35:51,680 Speaker 1: little bit surreal. I don't really remember. You didn't have 638 00:35:51,680 --> 00:35:55,240 Speaker 1: a service or anything. Now. I mean he got knocked 639 00:35:55,239 --> 00:36:00,960 Speaker 1: out after um um Iowa so um. But once they 640 00:36:00,960 --> 00:36:03,719 Speaker 1: become the nominee, the kids are suddenly his lives have 641 00:36:03,800 --> 00:36:07,399 Speaker 1: turned upside out. I don't know. I mean, even if 642 00:36:07,440 --> 00:36:10,040 Speaker 1: you lose, Like do people really know much about well 643 00:36:10,080 --> 00:36:12,800 Speaker 1: Bob Dole's kids or will Met Romney's kids. I'm not 644 00:36:12,880 --> 00:36:14,680 Speaker 1: sure they really. If you're in college and there's a 645 00:36:14,719 --> 00:36:17,839 Speaker 1: secret service contingency there, I gotta think that messes your 646 00:36:17,880 --> 00:36:21,400 Speaker 1: life or it certainly is impactful. It doesn't. It's not 647 00:36:21,480 --> 00:36:23,839 Speaker 1: going to mess up your life. But suddenly you're going 648 00:36:23,880 --> 00:36:26,280 Speaker 1: to class and there are four guys with dark glasses 649 00:36:26,320 --> 00:36:31,080 Speaker 1: and little earbuds in. That's got to be a little surreal. Yeah, well, 650 00:36:31,160 --> 00:36:35,200 Speaker 1: it's been funny. I mean at that time, like you're 651 00:36:35,400 --> 00:36:37,719 Speaker 1: you know, when you're in college or or a kid. 652 00:36:37,880 --> 00:36:41,160 Speaker 1: He like you know, like you're you've grown up with it. 653 00:36:41,160 --> 00:36:43,520 Speaker 1: It's always been. It's not like it is like like 654 00:36:43,600 --> 00:36:46,520 Speaker 1: the way it is, Like you're pretty adjustable as it is, 655 00:36:47,280 --> 00:36:50,400 Speaker 1: and you're kind of completely self absorbed anyway, so like 656 00:36:50,440 --> 00:36:53,920 Speaker 1: you don't we'll have the perspective to understand that like 657 00:36:54,000 --> 00:36:56,440 Speaker 1: that that things are weird. And and you know, when 658 00:36:56,480 --> 00:37:00,239 Speaker 1: I wrote this book, I thought, like, well, sure earlier 659 00:37:00,239 --> 00:37:01,880 Speaker 1: people are going to talk about that my mom was 660 00:37:01,920 --> 00:37:04,600 Speaker 1: on the board of Enron, And did that ever come 661 00:37:04,680 --> 00:37:06,200 Speaker 1: up in any of the reviews. It has not come 662 00:37:06,280 --> 00:37:09,920 Speaker 1: up at all. I mean. In fact, you know, the 663 00:37:10,000 --> 00:37:13,520 Speaker 1: connection with my dad has only been mentioned twice, and 664 00:37:13,520 --> 00:37:16,680 Speaker 1: that is here like today, Well I have I felt 665 00:37:16,760 --> 00:37:19,680 Speaker 1: I felt obligated that if I didn't disclose that up front, 666 00:37:19,960 --> 00:37:22,120 Speaker 1: because I never want someone to come in and say, 667 00:37:22,400 --> 00:37:24,759 Speaker 1: this isn't supposed to be gotcha, you know, this is 668 00:37:24,760 --> 00:37:27,200 Speaker 1: supposed to be Hey, who are you? What have you done? 669 00:37:27,200 --> 00:37:30,040 Speaker 1: And how did that come about? That that's the thinking here. 670 00:37:30,320 --> 00:37:32,440 Speaker 1: So that's what I said to Arthur. Hey, you know, 671 00:37:32,640 --> 00:37:37,480 Speaker 1: is he okay with the fact that, um and uh? 672 00:37:37,520 --> 00:37:40,480 Speaker 1: I guess Arthur's thought was, well, let's find out, let's 673 00:37:40,520 --> 00:37:43,319 Speaker 1: send the email. So so Enron has never come up 674 00:37:43,320 --> 00:37:46,520 Speaker 1: in any of the book coverage. Now, to be fair, 675 00:37:47,280 --> 00:37:51,200 Speaker 1: what your parents did in their professional career should not 676 00:37:51,960 --> 00:37:56,280 Speaker 1: color how someone interprets your work. Your work the book 677 00:37:56,480 --> 00:37:59,040 Speaker 1: at the very least stands on its own, and it's 678 00:37:59,080 --> 00:38:05,080 Speaker 1: gotten really good reviews. So too, I could see both sides. Well, 679 00:38:05,120 --> 00:38:08,160 Speaker 1: you know, there's a shareholder at were their shareholder activists 680 00:38:08,160 --> 00:38:10,879 Speaker 1: with Enron? I don't rever call that it was such 681 00:38:10,920 --> 00:38:13,160 Speaker 1: a hot stock. It did so well for so long. 682 00:38:14,000 --> 00:38:16,239 Speaker 1: Was there even a window for activists to jump in 683 00:38:16,280 --> 00:38:19,560 Speaker 1: on that? Well? So there were some some some loud 684 00:38:19,600 --> 00:38:22,880 Speaker 1: short sellers. Right, well, so Jim Chano not a previous 685 00:38:22,960 --> 00:38:26,680 Speaker 1: guest but not exactly. And the journalists were were engaged, 686 00:38:26,920 --> 00:38:30,200 Speaker 1: you know, Bethany McClain and also a guest on the 687 00:38:30,320 --> 00:38:35,480 Speaker 1: previous guest on the show, and she's great and then fabulous, 688 00:38:35,480 --> 00:38:38,120 Speaker 1: and then you had like there was an email like, 689 00:38:38,480 --> 00:38:40,920 Speaker 1: you know, like an internal you know what kind of 690 00:38:40,920 --> 00:38:45,960 Speaker 1: a dear chairman email, like you know, which who who who? Didn't? Um, 691 00:38:46,000 --> 00:38:48,680 Speaker 1: I forget her name, dear ken, you know, like I 692 00:38:48,680 --> 00:38:52,680 Speaker 1: want to say Tiffany something, Tiffany Watkins or something, but 693 00:38:52,719 --> 00:38:56,959 Speaker 1: it was like it was a person or something something 694 00:38:57,000 --> 00:39:00,799 Speaker 1: like that. And like I actually looked at that for 695 00:39:00,800 --> 00:39:02,799 Speaker 1: for inclusion in the book. I mean I looked at 696 00:39:02,800 --> 00:39:06,800 Speaker 1: a lot of these, you know, I'm originally the book 697 00:39:07,000 --> 00:39:10,279 Speaker 1: was just going to be a collection of letters and 698 00:39:10,360 --> 00:39:15,160 Speaker 1: not necessarily all shareholder activism and and not all a 699 00:39:15,200 --> 00:39:17,920 Speaker 1: financial activism. So like like I looked at like some 700 00:39:18,040 --> 00:39:21,480 Speaker 1: PETERA letters and and um the gad flies, and I 701 00:39:21,520 --> 00:39:24,960 Speaker 1: looked at at the un run one and ultimately the 702 00:39:24,960 --> 00:39:27,759 Speaker 1: theme in this works so well, yeah, I mean like 703 00:39:27,800 --> 00:39:30,600 Speaker 1: the book like as I narrowed it down, it must 704 00:39:30,600 --> 00:39:33,800 Speaker 1: have come together. Oh, of course this is a coherent 705 00:39:33,920 --> 00:39:37,439 Speaker 1: package as opposed to a disparates mattering of letters all 706 00:39:37,440 --> 00:39:40,440 Speaker 1: over the place. That that's the challenge when you're dealing 707 00:39:40,440 --> 00:39:42,680 Speaker 1: with a lot of different sources. How can I make 708 00:39:42,719 --> 00:39:47,600 Speaker 1: this thematically consistent as opposed to just you know, I 709 00:39:47,640 --> 00:39:52,319 Speaker 1: write about putting together daily lists, I call I. I 710 00:39:52,400 --> 00:39:55,399 Speaker 1: describe it as curate viciously. And you have to do 711 00:39:55,440 --> 00:39:59,320 Speaker 1: that because there's so many really interesting things that digress 712 00:39:59,400 --> 00:40:02,919 Speaker 1: you away for like this conversation. Um, so you ended 713 00:40:03,000 --> 00:40:05,920 Speaker 1: up deciding it just wasn't worth it to put that in. 714 00:40:06,120 --> 00:40:10,239 Speaker 1: There was nothing work like I mean, look, I give 715 00:40:10,280 --> 00:40:14,359 Speaker 1: her credit, like, you know, like for for speaking up, 716 00:40:14,400 --> 00:40:17,560 Speaker 1: but it's kind of a a cuckoo you know, crazy email, 717 00:40:17,600 --> 00:40:21,120 Speaker 1: Like I mean, it wasn't like a Lobe letter. Yeah, 718 00:40:21,160 --> 00:40:24,200 Speaker 1: I mean speaking of crazy. Yeah, we didn't get to 719 00:40:24,239 --> 00:40:29,040 Speaker 1: the Lobe conversations. His letters are poison pen letters. They 720 00:40:29,040 --> 00:40:33,640 Speaker 1: are just dripping with disdain. How effective are these? Well, 721 00:40:33,719 --> 00:40:35,800 Speaker 1: I think that was a little bit of a product 722 00:40:35,800 --> 00:40:38,880 Speaker 1: of the time. So, like you have to to to 723 00:40:38,960 --> 00:40:41,720 Speaker 1: put yourself in the late ninety nineties and the and 724 00:40:41,719 --> 00:40:45,360 Speaker 1: and the early odds, like the like the hedge fund businesses. 725 00:40:45,600 --> 00:40:48,240 Speaker 1: It's it's a new industry. It has not been around 726 00:40:48,239 --> 00:40:51,680 Speaker 1: that long. It doesn't have a lot of credibility. Um, 727 00:40:51,800 --> 00:40:54,800 Speaker 1: you've just had what what years are we talking about? 728 00:40:54,880 --> 00:40:59,000 Speaker 1: Early two thousand's Okay, and like like you know, and 729 00:40:59,440 --> 00:41:01,719 Speaker 1: look at I look at the hedge fund industry is 730 00:41:01,840 --> 00:41:06,439 Speaker 1: having been around Alfred winslow end since the late sixties. Yeah, 731 00:41:06,480 --> 00:41:09,279 Speaker 1: it's so it's been but they were teeny tiny. They 732 00:41:09,280 --> 00:41:13,000 Speaker 1: were you know, the joke is there were a hundred 733 00:41:13,040 --> 00:41:16,600 Speaker 1: hedge funds for the pet for the thirty years before 734 00:41:16,640 --> 00:41:19,839 Speaker 1: two thousand, um, and now there's eleven thousand. But it's 735 00:41:19,880 --> 00:41:22,919 Speaker 1: the same had hundred hedge funds that are creating alpha. Well, 736 00:41:22,960 --> 00:41:25,919 Speaker 1: I think about like the beginning of the kind of 737 00:41:26,400 --> 00:41:33,320 Speaker 1: activists shareholders as more, beginning in the nineties and um, 738 00:41:33,360 --> 00:41:36,120 Speaker 1: and you know what you had there was you know, 739 00:41:36,200 --> 00:41:38,960 Speaker 1: like you had a period in the eighties where like 740 00:41:39,040 --> 00:41:41,520 Speaker 1: these activists had lots of power, like the corporate radars 741 00:41:41,560 --> 00:41:44,040 Speaker 1: they like, I mean, you know, they ultimately had cash 742 00:41:44,120 --> 00:41:47,640 Speaker 1: because of Michael Milkin and and by the nineties and 743 00:41:47,680 --> 00:41:50,920 Speaker 1: the two thousand's, like the activists, you know, they like 744 00:41:50,960 --> 00:41:53,160 Speaker 1: they no longer have Michael Milkin, So there's no more 745 00:41:53,239 --> 00:41:58,000 Speaker 1: the sort of just the d powder. Yeah. And so 746 00:41:58,400 --> 00:42:01,200 Speaker 1: for them to to get the attention of the board, 747 00:42:02,080 --> 00:42:04,000 Speaker 1: you know that, like, they tried a whole bunch of 748 00:42:04,040 --> 00:42:08,200 Speaker 1: different tactics, but you know, well the one that Lobe 749 00:42:08,320 --> 00:42:12,080 Speaker 1: us was you know what I call the shame driven activists, 750 00:42:12,560 --> 00:42:14,680 Speaker 1: you know, where like he needs to get the attention 751 00:42:14,719 --> 00:42:17,759 Speaker 1: of the other shareholders, of the board of directors and 752 00:42:17,800 --> 00:42:20,479 Speaker 1: of the and of the management team. And he did 753 00:42:20,520 --> 00:42:25,800 Speaker 1: it through you know, a town hangings and and public shamings. 754 00:42:25,840 --> 00:42:28,759 Speaker 1: And is that an effective technique? Does it work? I 755 00:42:28,800 --> 00:42:33,080 Speaker 1: think it worked then because it got people's attention. It 756 00:42:33,200 --> 00:42:37,240 Speaker 1: gave him a reputation that directors would be like afraid 757 00:42:37,280 --> 00:42:41,120 Speaker 1: of but like but ultimately like it also compels the 758 00:42:41,160 --> 00:42:44,279 Speaker 1: management to circle their wagons. And well, nowadays it's not 759 00:42:44,320 --> 00:42:49,840 Speaker 1: necessary because activism, you know, from from hedge funds is credible. 760 00:42:50,239 --> 00:42:52,799 Speaker 1: And so what you will really need to do is 761 00:42:53,120 --> 00:42:56,000 Speaker 1: convinced the vanguards and the cowpers of the world that 762 00:42:56,480 --> 00:43:00,560 Speaker 1: like that your ideas are right and doing that l 763 00:43:01,120 --> 00:43:04,040 Speaker 1: is not about you know, we'll calling out the CEOs mom, 764 00:43:04,080 --> 00:43:08,640 Speaker 1: you know, so, which which Lobe did in one notable 765 00:43:08,760 --> 00:43:13,759 Speaker 1: letter basically saying something along the lines of, um, you know, 766 00:43:14,440 --> 00:43:17,799 Speaker 1: I think the final line was I doubt if you 767 00:43:17,880 --> 00:43:20,239 Speaker 1: ignore this letter that your mom is going to file 768 00:43:20,480 --> 00:43:24,360 Speaker 1: fire you, or words to that effect which are pretty scathing. 769 00:43:24,440 --> 00:43:28,120 Speaker 1: So you know, and I'm pulling one of these statements 770 00:43:28,480 --> 00:43:33,239 Speaker 1: the Star Gas Partners. This is just great. Sadly, you're 771 00:43:33,280 --> 00:43:36,480 Speaker 1: ineptitude is not limited to your failure to communicate with 772 00:43:36,600 --> 00:43:40,440 Speaker 1: bond and unit holders. A review of your record reveals 773 00:43:41,320 --> 00:43:45,600 Speaker 1: years of value destruction and strategic blungers which have led 774 00:43:45,680 --> 00:43:49,879 Speaker 1: us to w one of the most dangerous and incompetent 775 00:43:49,960 --> 00:43:54,640 Speaker 1: executives in America. That's not enough, he has to keep going, 776 00:43:55,520 --> 00:43:58,239 Speaker 1: and he says I was amused to learn in the 777 00:43:58,280 --> 00:44:02,279 Speaker 1: course of our investigation that at Cornell University there is 778 00:44:02,320 --> 00:44:05,560 Speaker 1: an IRAQ seven scholarship. That's who the letter was to 779 00:44:05,800 --> 00:44:08,880 Speaker 1: r X seven president and CEO of Star Gas Partners. 780 00:44:09,280 --> 00:44:12,840 Speaker 1: One can only pity the poor student who suffers the 781 00:44:12,880 --> 00:44:18,200 Speaker 1: indignity of attaching your name to his academic record. So 782 00:44:18,640 --> 00:44:21,600 Speaker 1: how how typical or a typical is that sort of 783 00:44:22,000 --> 00:44:26,120 Speaker 1: viciousness for Lobe and for other investors. Are his poison 784 00:44:26,120 --> 00:44:29,040 Speaker 1: pen letters unique to him? Or if other people adapted 785 00:44:29,040 --> 00:44:31,399 Speaker 1: that well, at that time, there were lots of them, 786 00:44:31,680 --> 00:44:33,600 Speaker 1: and he was not even the first one. Like the 787 00:44:33,640 --> 00:44:36,759 Speaker 1: first guy like that really did that was like this 788 00:44:36,760 --> 00:44:41,080 Speaker 1: crazy guy named Bob Chapman. And um, I mean at 789 00:44:41,120 --> 00:44:44,920 Speaker 1: that time it worked like because you know, no one 790 00:44:44,960 --> 00:44:48,440 Speaker 1: else was paying attention to these hedge funds to get 791 00:44:48,440 --> 00:44:50,840 Speaker 1: a letter, you know, I mean, you know, they didn't 792 00:44:51,239 --> 00:44:54,120 Speaker 1: have the capital to just like to buy enough shares 793 00:44:54,160 --> 00:44:59,799 Speaker 1: to uh you're immediately you're filing and you're doing all 794 00:44:59,800 --> 00:45:02,480 Speaker 1: these things that that's usually with a big company, that's 795 00:45:02,480 --> 00:45:05,000 Speaker 1: a chunk of money. Yeah, but Dan Lobe, you know, 796 00:45:05,080 --> 00:45:08,640 Speaker 1: well nowadays, Um, first of all, I mean, um, he 797 00:45:08,680 --> 00:45:12,080 Speaker 1: doesn't even do that much activism and when he does it, 798 00:45:12,400 --> 00:45:15,400 Speaker 1: like he'll still do a public letter, but but like 799 00:45:15,440 --> 00:45:18,080 Speaker 1: he knows that like that, like that he needs to 800 00:45:18,160 --> 00:45:22,040 Speaker 1: build consensus like among the big institutions. Like it's just 801 00:45:22,239 --> 00:45:25,720 Speaker 1: well not the way that things in in the were. 802 00:45:25,840 --> 00:45:29,080 Speaker 1: And um, you know you know that was more a 803 00:45:29,160 --> 00:45:32,200 Speaker 1: product of those times. Makes makes a lot of sense. 804 00:45:32,680 --> 00:45:38,920 Speaker 1: So let's go through some questions we missed, um, and 805 00:45:38,960 --> 00:45:41,800 Speaker 1: there were two in particular that had that I wanted 806 00:45:41,840 --> 00:45:46,120 Speaker 1: to make sure we got to the first. Well, let's 807 00:45:46,120 --> 00:45:50,440 Speaker 1: start with the second. First, UM activist investors now have 808 00:45:50,600 --> 00:45:53,400 Speaker 1: much more power than they used to and the ability 809 00:45:53,400 --> 00:45:56,640 Speaker 1: to affect change in ways that they couldn't do in 810 00:45:56,680 --> 00:45:59,120 Speaker 1: the past or that were more difficult in the past. 811 00:45:59,480 --> 00:46:02,080 Speaker 1: So just us that How how has the role of 812 00:46:02,360 --> 00:46:05,560 Speaker 1: and the authority and power of activists changed over the 813 00:46:05,600 --> 00:46:09,440 Speaker 1: past few days. Well, you had a period, you know, 814 00:46:09,520 --> 00:46:13,640 Speaker 1: from the sixties until the eighties where you know, a 815 00:46:13,719 --> 00:46:18,560 Speaker 1: share ownership in the country UM had reconcentrated, you know, 816 00:46:18,920 --> 00:46:21,560 Speaker 1: but into the hands of these big institutions and the 817 00:46:21,560 --> 00:46:25,200 Speaker 1: big the big institutions were not that engaged, you know, 818 00:46:25,360 --> 00:46:30,560 Speaker 1: they were not UM, you know that involved. We're talking foundations, 819 00:46:30,640 --> 00:46:34,560 Speaker 1: Endowman's pensions, big institutional investor, the big mutual funds, the 820 00:46:34,600 --> 00:46:38,520 Speaker 1: big pension funds. And there's a real turning point in 821 00:46:38,520 --> 00:46:41,960 Speaker 1: the nineteen eighties because like you have the corporate raiders, 822 00:46:42,120 --> 00:46:44,239 Speaker 1: so milk and funding a lot of these people, Like 823 00:46:44,280 --> 00:46:48,720 Speaker 1: you have green mail, which will really was well pretty 824 00:46:48,760 --> 00:46:53,080 Speaker 1: blatant in its you know, will mistreatment of public shareholders. 825 00:46:53,120 --> 00:46:56,360 Speaker 1: Like if you're you know, a company and like you know, 826 00:46:56,480 --> 00:47:00,520 Speaker 1: and you buy out like a loud and troublesome shareholder 827 00:47:00,560 --> 00:47:03,160 Speaker 1: for a big premium over everyone else just to make 828 00:47:03,200 --> 00:47:07,640 Speaker 1: them go away. You're clearly disservicing your shareholders. And then 829 00:47:07,840 --> 00:47:11,880 Speaker 1: you had Ross Perol happened. And with Ross Perol, um, 830 00:47:11,920 --> 00:47:15,680 Speaker 1: you know, GM like his undergoing you know, a few 831 00:47:15,719 --> 00:47:19,240 Speaker 1: decades of decline. It's very public. You know, um, everyone 832 00:47:19,320 --> 00:47:24,240 Speaker 1: knows that they're beginning to fall behind the Japanese and 833 00:47:25,239 --> 00:47:27,920 Speaker 1: you know, their shareholder base. Are these big institutions that 834 00:47:28,000 --> 00:47:33,399 Speaker 1: have been in GM forever and they see GM pay 835 00:47:33,520 --> 00:47:36,440 Speaker 1: Ross Perol three quarters of a billion dollars. It's a 836 00:47:36,480 --> 00:47:39,040 Speaker 1: lot of money GM, yeah, to resign from the board 837 00:47:39,040 --> 00:47:41,920 Speaker 1: of directors, and so they're paying this guy, who they 838 00:47:42,040 --> 00:47:45,640 Speaker 1: view as the most engaged and best director, you know, 839 00:47:45,719 --> 00:47:49,759 Speaker 1: to leave it. And it kind of showed them, well, 840 00:47:49,800 --> 00:47:52,959 Speaker 1: we have created a monster. And from that point on, 841 00:47:53,560 --> 00:47:58,200 Speaker 1: the big institutions began to get engaged and they began 842 00:47:58,239 --> 00:48:01,319 Speaker 1: to like to pay attention. They again like to vote 843 00:48:01,360 --> 00:48:04,200 Speaker 1: their like their proxies with a lot more thought. And 844 00:48:04,239 --> 00:48:07,040 Speaker 1: that has you know, like in a funny way, it's 845 00:48:07,040 --> 00:48:10,520 Speaker 1: empowered these activists because if you do have ideas, like 846 00:48:10,600 --> 00:48:14,200 Speaker 1: you know that resonate with investors, or like if you 847 00:48:14,239 --> 00:48:17,640 Speaker 1: want to push for a CEO to be fired and 848 00:48:17,800 --> 00:48:20,200 Speaker 1: the people like like at Cowper's, well maybe they're not 849 00:48:20,400 --> 00:48:24,480 Speaker 1: as comfortable, you know, will publicly I'm asking for someone 850 00:48:24,480 --> 00:48:26,399 Speaker 1: to be fired, but well maybe they think that they 851 00:48:26,400 --> 00:48:29,840 Speaker 1: need to go. You know, they support a lot of 852 00:48:29,840 --> 00:48:33,560 Speaker 1: these activist campaigns and so like you know, this empowerment 853 00:48:33,680 --> 00:48:36,919 Speaker 1: of the of of the activist, a lot of that 854 00:48:37,040 --> 00:48:40,240 Speaker 1: is about the resolve of the big passive institutions. That 855 00:48:40,239 --> 00:48:43,719 Speaker 1: that's interesting. So so let's talk about different sectors of companies. 856 00:48:43,760 --> 00:48:48,360 Speaker 1: One of the things I asked you about earlier um 857 00:48:48,480 --> 00:48:50,759 Speaker 1: Off Off Mike, I want to bring up on Mike. 858 00:48:50,880 --> 00:48:53,799 Speaker 1: So you have tech companies and then you have like 859 00:48:53,840 --> 00:48:57,359 Speaker 1: a big consumer products company like Colgate palm Olive. Are 860 00:48:57,400 --> 00:49:01,319 Speaker 1: their differences in how activists are coach those two companies? 861 00:49:01,920 --> 00:49:06,120 Speaker 1: And conversely, how do those two sectors a tech company 862 00:49:06,120 --> 00:49:09,360 Speaker 1: in a consumer good sector, how do their CEOs and 863 00:49:09,440 --> 00:49:14,200 Speaker 1: boards respond to activists differently? Yeah, I mean I think 864 00:49:14,320 --> 00:49:19,080 Speaker 1: that like the ultimately a fundamentally, like they're all very 865 00:49:19,120 --> 00:49:23,800 Speaker 1: similar like their companies, and they often have governance issues 866 00:49:23,840 --> 00:49:25,719 Speaker 1: and like you have to decide who is like the 867 00:49:25,840 --> 00:49:28,319 Speaker 1: right person to lead this company. And you know, like 868 00:49:28,360 --> 00:49:32,480 Speaker 1: you'll see people say like oh, well, this is a complicated, 869 00:49:32,719 --> 00:49:37,040 Speaker 1: UM high technology company, and so like you really need 870 00:49:37,080 --> 00:49:41,799 Speaker 1: to be sophisticated. So so UM activists have no place there. 871 00:49:41,800 --> 00:49:43,919 Speaker 1: And that's just clearly not right. I mean, if it's 872 00:49:43,960 --> 00:49:47,240 Speaker 1: a like a highly you know, complicated company, then like 873 00:49:47,239 --> 00:49:49,200 Speaker 1: like it matters who the CEO is and like it 874 00:49:49,239 --> 00:49:52,319 Speaker 1: matters that like you don't will tolerate, you know, bad 875 00:49:52,360 --> 00:49:55,200 Speaker 1: governance for long periods of time. And then like you'll 876 00:49:55,239 --> 00:49:57,960 Speaker 1: see people say, oh, we'll Colgate or well, you know, 877 00:49:58,040 --> 00:50:02,359 Speaker 1: Coca Cola. They're these like mature businesses that can run themselves, 878 00:50:02,400 --> 00:50:05,160 Speaker 1: like who cares about the board, Like like a monkey 879 00:50:05,200 --> 00:50:08,760 Speaker 1: could run the company. That's also clearly not true because 880 00:50:08,880 --> 00:50:11,640 Speaker 1: with a mature business, like you have to allocate the capital, 881 00:50:12,239 --> 00:50:14,000 Speaker 1: like you have to decide what to do with your 882 00:50:14,000 --> 00:50:16,680 Speaker 1: excess cash, if you will pay a dividend or buyback 883 00:50:16,760 --> 00:50:21,680 Speaker 1: shares or pursue opportunities in M and A and so 884 00:50:21,800 --> 00:50:24,160 Speaker 1: all of those. And that's before we start looking at 885 00:50:24,200 --> 00:50:28,920 Speaker 1: a competitive threat from them. And I think that like 886 00:50:28,960 --> 00:50:32,279 Speaker 1: the history has shown that as secure as you think 887 00:50:32,320 --> 00:50:34,400 Speaker 1: you are, if you know, when you look at GM 888 00:50:34,440 --> 00:50:36,239 Speaker 1: in the nineteen fifties and you say, this is a 889 00:50:36,360 --> 00:50:40,040 Speaker 1: durable competitive advantage, they have a cost advantage, they have 890 00:50:40,280 --> 00:50:43,799 Speaker 1: like a dealer network, they have the best brands and 891 00:50:43,800 --> 00:50:46,319 Speaker 1: and and and you know, in two decades they lose 892 00:50:46,320 --> 00:50:49,800 Speaker 1: out to the Japanese who like have no capital, I 893 00:50:49,880 --> 00:50:53,960 Speaker 1: have terrible brand you know, like um u um a 894 00:50:54,000 --> 00:50:59,520 Speaker 1: reputation and um like like they have no dealer networks. 895 00:50:59,600 --> 00:51:02,160 Speaker 1: And you know, so I mean even the mature great 896 00:51:02,200 --> 00:51:05,840 Speaker 1: business as we've seen like in Coca Cola, can Can. 897 00:51:06,000 --> 00:51:08,359 Speaker 1: I think this year is the hard time. I think 898 00:51:08,400 --> 00:51:10,359 Speaker 1: this is the first year where bottled water is gonna 899 00:51:10,400 --> 00:51:15,239 Speaker 1: outsell soda. And so if you're not there's always competitive 900 00:51:15,280 --> 00:51:19,360 Speaker 1: threats Andy Gross said, only the paranoids survive. And and 901 00:51:19,440 --> 00:51:22,600 Speaker 1: he's right. If if you don't think your business is 902 00:51:22,600 --> 00:51:26,600 Speaker 1: going to be attacked in the competition in the marketplace, 903 00:51:26,680 --> 00:51:30,680 Speaker 1: you're you're kidding yourself. So let me turn the turn 904 00:51:30,719 --> 00:51:33,359 Speaker 1: the dial a little bit and shift the focus. So 905 00:51:33,480 --> 00:51:35,680 Speaker 1: you go through all these activists, you go through all 906 00:51:35,719 --> 00:51:39,600 Speaker 1: these businesses, You look at how all this stuff has changed, 907 00:51:40,280 --> 00:51:43,880 Speaker 1: how has this impacted you're thinking about how you invest 908 00:51:44,520 --> 00:51:47,480 Speaker 1: your capital. I don't mean you as a manager getting 909 00:51:47,480 --> 00:51:50,799 Speaker 1: a deer chairman letter. I mean what has been the 910 00:51:50,840 --> 00:51:54,000 Speaker 1: impact of this on your thought process in terms of 911 00:51:54,040 --> 00:51:57,319 Speaker 1: putting risk capital out there, Yeah, I mean it gave 912 00:51:57,360 --> 00:52:00,440 Speaker 1: me historical perspective, like like a lot of the history 913 00:52:00,520 --> 00:52:04,480 Speaker 1: I didn't know. But you know, I think investors learned 914 00:52:04,480 --> 00:52:08,200 Speaker 1: best from losing money, and I kind of had lost 915 00:52:08,640 --> 00:52:12,440 Speaker 1: enough you know, money through you know, through bad governance, 916 00:52:12,520 --> 00:52:14,879 Speaker 1: like to learn the lessons of the book. Like I think, 917 00:52:15,400 --> 00:52:17,600 Speaker 1: you know, a lot of the value of the book 918 00:52:17,680 --> 00:52:21,359 Speaker 1: is explaining how the system works and and and how 919 00:52:21,360 --> 00:52:24,480 Speaker 1: he got to now and you know, trying to to 920 00:52:24,760 --> 00:52:28,239 Speaker 1: do it in an entertaining way. And I think a 921 00:52:28,280 --> 00:52:31,000 Speaker 1: lot of the of the things that I fundamentally learned 922 00:52:31,040 --> 00:52:34,480 Speaker 1: were like about just like the power of these like 923 00:52:34,760 --> 00:52:39,480 Speaker 1: behind the scenes, uh, passive investors. But in terms of 924 00:52:39,480 --> 00:52:44,319 Speaker 1: of of affecting you know, my personal investments. You know, 925 00:52:44,440 --> 00:52:47,200 Speaker 1: in value investing, you do have to take into account 926 00:52:47,200 --> 00:52:50,399 Speaker 1: the the governance. But I had already you know, learned 927 00:52:50,440 --> 00:52:53,239 Speaker 1: the hard way about that, so I'm not sure it's 928 00:52:53,239 --> 00:52:56,040 Speaker 1: affected it that much. So what attracted you to value 929 00:52:56,080 --> 00:53:00,719 Speaker 1: investing in the first place, other than Colombia, um, which 930 00:53:00,760 --> 00:53:03,960 Speaker 1: really that's what Ben Graham taught, right, I mean, is 931 00:53:04,000 --> 00:53:06,800 Speaker 1: that is it safe to say Columbia Graduate School of 932 00:53:06,840 --> 00:53:10,360 Speaker 1: Business is is uh square one when it comes to 933 00:53:10,440 --> 00:53:13,560 Speaker 1: value investing, you know, they like to say that, and 934 00:53:13,840 --> 00:53:16,839 Speaker 1: it like it was true for me. And I mean 935 00:53:17,120 --> 00:53:20,480 Speaker 1: I like, after college, Um, you know, I played music like, 936 00:53:20,840 --> 00:53:23,680 Speaker 1: and I had no business background, Like I didn't know accounting, like, 937 00:53:23,719 --> 00:53:26,160 Speaker 1: I had never heard of Warren Buffett. And so when 938 00:53:26,200 --> 00:53:30,480 Speaker 1: I got to to Columbia, um, like, I didn't know 939 00:53:30,480 --> 00:53:32,400 Speaker 1: what I was gonna do. Like I took like a 940 00:53:32,440 --> 00:53:35,560 Speaker 1: lot of different classes, and I took a class with 941 00:53:35,840 --> 00:53:39,560 Speaker 1: Joel green Block and the little book that the Market. 942 00:53:39,760 --> 00:53:42,399 Speaker 1: And before that, he wrote a book called You Can 943 00:53:42,440 --> 00:53:46,200 Speaker 1: Be a Stock Market Genius. Yes, that's about you know, 944 00:53:46,280 --> 00:53:49,640 Speaker 1: restructurings and and and and spinoffs. So I think this, 945 00:53:50,160 --> 00:53:54,320 Speaker 1: like the subtitle is like uncovering the the secret hiding 946 00:53:54,320 --> 00:53:58,439 Speaker 1: places of you know, value. Yeah, and I think that, 947 00:53:58,719 --> 00:54:01,279 Speaker 1: you know, yeah that I like had never heard of 948 00:54:01,320 --> 00:54:04,160 Speaker 1: that stuff, and the whole idea of buying a fifty 949 00:54:04,160 --> 00:54:08,000 Speaker 1: cent dollar it, you know, well really resonated like with me, 950 00:54:08,280 --> 00:54:12,040 Speaker 1: and so I began just to consume everything I could 951 00:54:12,120 --> 00:54:14,120 Speaker 1: and that, of course will lead me to warm Buffett 952 00:54:14,200 --> 00:54:17,359 Speaker 1: and and um, you know that is how I got 953 00:54:17,400 --> 00:54:21,960 Speaker 1: into it. I'm gonna pull up the exact quote, you 954 00:54:22,000 --> 00:54:25,920 Speaker 1: can be a stock market genius uncovering the secret hiding 955 00:54:25,960 --> 00:54:32,640 Speaker 1: places of stock market value profits. And that came out. 956 00:54:33,000 --> 00:54:35,480 Speaker 1: That book has really been around for a while and 957 00:54:35,480 --> 00:54:39,680 Speaker 1: stood stood the test of time. Um so I plowed 958 00:54:39,719 --> 00:54:42,960 Speaker 1: through a lot of questions. Let's go into our standard 959 00:54:43,000 --> 00:54:46,160 Speaker 1: questions that I asked all my guests. Uh So you 960 00:54:46,200 --> 00:54:49,400 Speaker 1: mentioned you you were playing music. What what did you 961 00:54:49,440 --> 00:54:51,399 Speaker 1: tell us a little bit about your background? What did 962 00:54:51,400 --> 00:54:54,759 Speaker 1: you do before finance? So I played in a rock band. 963 00:54:55,600 --> 00:54:59,279 Speaker 1: Would you play guitar? And so that makes you our 964 00:54:59,400 --> 00:55:05,840 Speaker 1: third guitar. I've had Lawrence Juber and before that, John Pizzarelli, 965 00:55:05,920 --> 00:55:08,440 Speaker 1: and we have another guitarist coming up next month. I'll 966 00:55:08,920 --> 00:55:12,359 Speaker 1: leave that for a surprise. So that'll your number three. 967 00:55:13,160 --> 00:55:17,239 Speaker 1: How long did you do that for? Pretty much through college, 968 00:55:17,400 --> 00:55:20,960 Speaker 1: like I think, like I kind of in college, you know, 969 00:55:21,280 --> 00:55:23,520 Speaker 1: you know, we're majored in being in a band. And 970 00:55:23,560 --> 00:55:29,520 Speaker 1: then uh I graduated in ninety six and pretty much 971 00:55:29,560 --> 00:55:31,719 Speaker 1: from then until I went to business school in two 972 00:55:31,719 --> 00:55:35,600 Speaker 1: thousand and one, m I toured and then you know, 973 00:55:35,600 --> 00:55:38,200 Speaker 1: when I was not on tour, I tempt um. I 974 00:55:38,239 --> 00:55:41,480 Speaker 1: lived in d C. It's interesting to come to New 975 00:55:41,560 --> 00:55:45,120 Speaker 1: York because people in bands in New York have you know, 976 00:55:45,360 --> 00:55:48,320 Speaker 1: real professions. And actually, you know, we'll have real jobs. 977 00:55:48,360 --> 00:55:51,080 Speaker 1: But but in every other city, like you're like a 978 00:55:51,120 --> 00:55:55,319 Speaker 1: bartender or a temp or, like a restaurant and and 979 00:55:55,400 --> 00:55:59,760 Speaker 1: so like I basically I toured and tempt That sounds interesting. 980 00:55:59,760 --> 00:56:03,160 Speaker 1: You know, Jeff Gunlock was a drummer really before he 981 00:56:03,360 --> 00:56:07,560 Speaker 1: became a bond uh guru. And and it's always interesting 982 00:56:07,560 --> 00:56:11,359 Speaker 1: to see how people find their way. So so you're 983 00:56:11,440 --> 00:56:14,040 Speaker 1: you're playing rock and roll music, you're touring. What made 984 00:56:14,080 --> 00:56:17,680 Speaker 1: you say, listen, I enjoy life on the road, but 985 00:56:17,719 --> 00:56:19,560 Speaker 1: I really want to get an m B A. How 986 00:56:19,600 --> 00:56:22,000 Speaker 1: did how did that come about? Well, like, we really 987 00:56:23,200 --> 00:56:27,400 Speaker 1: weren't that successful, right, Like we kind of you know, 988 00:56:27,440 --> 00:56:30,640 Speaker 1: we did well in the sense like that that other 989 00:56:30,719 --> 00:56:38,160 Speaker 1: bands liked us. It's called aiden A d E n okay, sure, um, 990 00:56:39,120 --> 00:56:43,640 Speaker 1: you know we ultimately just weren't that good. And the 991 00:56:43,719 --> 00:56:46,080 Speaker 1: other band, you know, the other band members like we're 992 00:56:46,160 --> 00:56:49,839 Speaker 1: kind of like beginning to think about the future too. 993 00:56:49,920 --> 00:56:52,680 Speaker 1: And and and I remember I was in in d C. 994 00:56:52,800 --> 00:56:55,680 Speaker 1: And I met with Arthur Levitt. He was a friend 995 00:56:55,680 --> 00:57:01,640 Speaker 1: of my Dad's and like you know, um, you know, 996 00:57:01,680 --> 00:57:04,319 Speaker 1: I just like I tried to think about, you know, 997 00:57:04,400 --> 00:57:07,520 Speaker 1: what would be a versatile degree that would like you know, 998 00:57:07,560 --> 00:57:10,920 Speaker 1: allow me to at least discover something that I would 999 00:57:10,920 --> 00:57:14,000 Speaker 1: be good at. So I'm looking at for those of 1000 00:57:14,000 --> 00:57:16,040 Speaker 1: you who want to go to Amazon and check this out. 1001 00:57:16,160 --> 00:57:19,080 Speaker 1: How many CDs did you record? We had four, so 1002 00:57:19,120 --> 00:57:22,680 Speaker 1: we had I'm seeing Hay nineteen, which sounds like the 1003 00:57:22,800 --> 00:57:26,280 Speaker 1: Steely Dan song. Yeah, that's our third record, Black Cow. Yeah, 1004 00:57:26,520 --> 00:57:31,560 Speaker 1: also with Steely Dan Topsiders. That's I think that's our 1005 00:57:31,560 --> 00:57:34,720 Speaker 1: best record. Is that Topsider two thousand and two or 1006 00:57:34,800 --> 00:57:36,920 Speaker 1: is that the reissue in two thousand? I think it 1007 00:57:37,000 --> 00:57:40,320 Speaker 1: came out in a one, but um, but that one 1008 00:57:40,480 --> 00:57:43,080 Speaker 1: was like that was like the death of the band. 1009 00:57:43,120 --> 00:57:46,240 Speaker 1: That was where we I mean, that was a grim tour. 1010 00:57:47,480 --> 00:57:51,200 Speaker 1: Why the Steely Dan titles, I don't know. We liked 1011 00:57:51,280 --> 00:57:55,960 Speaker 1: them and what's at and they were very untrendy at 1012 00:57:56,000 --> 00:57:58,800 Speaker 1: that time. This was yeah yeah, I mean you know 1013 00:57:58,880 --> 00:58:02,280 Speaker 1: this was before like the like the the re emergence 1014 00:58:02,320 --> 00:58:06,760 Speaker 1: of yacht rockcause so I'm older than you. When I 1015 00:58:06,800 --> 00:58:12,040 Speaker 1: was in high school or maybe college, Uh, Gaucho came 1016 00:58:12,080 --> 00:58:17,320 Speaker 1: out and Asia was inescapable on the radios. It was so, 1017 00:58:17,600 --> 00:58:19,520 Speaker 1: but a lot of their stuff has really stood the 1018 00:58:19,520 --> 00:58:22,960 Speaker 1: test of time. If you like rock and you like jazz. 1019 00:58:23,480 --> 00:58:26,520 Speaker 1: There's an argument too when when we've had these debates, 1020 00:58:26,520 --> 00:58:29,240 Speaker 1: and there's a whole post somewhere on the blog if 1021 00:58:29,240 --> 00:58:31,840 Speaker 1: you look at what is the greatest who is the 1022 00:58:31,880 --> 00:58:35,680 Speaker 1: greatest rock and American rock and roll band? So by 1023 00:58:35,720 --> 00:58:39,120 Speaker 1: saying American, you're eliminating the Beatles, the Stones of who. 1024 00:58:39,240 --> 00:58:43,520 Speaker 1: And by saying bands, you're eliminating Bruce Springsteen and other 1025 00:58:44,080 --> 00:58:46,680 Speaker 1: people who who we really think of a solo artist, 1026 00:58:46,760 --> 00:58:51,440 Speaker 1: not bands. Steely Dan always makes the top five and 1027 00:58:51,480 --> 00:58:54,800 Speaker 1: you don't. Really I'll send you that link. I'll post 1028 00:58:54,840 --> 00:58:57,480 Speaker 1: it when when this goes up. But that's interesting. You 1029 00:58:57,560 --> 00:59:01,520 Speaker 1: guys really put out music and where we're regular, actual 1030 00:59:01,600 --> 00:59:03,960 Speaker 1: touring musicians. Yeah, and being in a touring band is 1031 00:59:03,960 --> 00:59:07,440 Speaker 1: an incredible experience. It like it really teaches you to 1032 00:59:07,520 --> 00:59:10,520 Speaker 1: get along with people, and it teaches you like a 1033 00:59:10,520 --> 00:59:13,680 Speaker 1: lot just well being in in a small vehicle with 1034 00:59:13,840 --> 00:59:17,760 Speaker 1: before people you're in a van touring the club to club. Yeah, 1035 00:59:17,840 --> 00:59:20,240 Speaker 1: we do, like you know, thirty two shows and thirty 1036 00:59:20,280 --> 00:59:22,800 Speaker 1: one days like that kind of thing. Right, and hope 1037 00:59:22,840 --> 00:59:25,480 Speaker 1: the thing doesn't break down. Yeah, and like you really 1038 00:59:25,520 --> 00:59:30,800 Speaker 1: like learn about like your own Like, you know, I'm 1039 00:59:30,880 --> 00:59:34,480 Speaker 1: emotional build up, you know, because if you're too uptight 1040 00:59:34,600 --> 00:59:36,920 Speaker 1: or you're two tents, that can be pretty miserable, you know. 1041 00:59:37,600 --> 00:59:40,680 Speaker 1: So I think it made all of us just like 1042 00:59:40,760 --> 00:59:42,560 Speaker 1: relaxed like a little bit. And I think that it 1043 00:59:42,640 --> 00:59:45,200 Speaker 1: was like I mean, like we're all you know, doing 1044 00:59:45,240 --> 00:59:48,080 Speaker 1: well professionally, and I think it was a valuable experience. 1045 00:59:48,600 --> 00:59:51,480 Speaker 1: That's quite fascinating. You you were, I know, I know 1046 00:59:51,600 --> 00:59:54,800 Speaker 1: Gunlock played um in a hair band and a hair 1047 00:59:54,880 --> 00:59:58,600 Speaker 1: metal band, and I'm trying to think there's one other 1048 00:59:58,640 --> 01:00:00,919 Speaker 1: person who was also a musician. A little pop into 1049 01:00:01,360 --> 01:00:05,320 Speaker 1: pop into my head. So you mentioned Arthur Levitt Um. 1050 01:00:05,680 --> 01:00:07,840 Speaker 1: Tell us a little bit about some of your mentors, 1051 01:00:07,920 --> 01:00:11,000 Speaker 1: and you conclude Arthur in that list. Yeah, I mean 1052 01:00:11,040 --> 01:00:12,800 Speaker 1: I think that Arthur is the main one. I mean 1053 01:00:12,920 --> 01:00:17,160 Speaker 1: he I think he really helped me get into business 1054 01:00:17,160 --> 01:00:19,919 Speaker 1: school in the first place. And then like he's just been, 1055 01:00:20,640 --> 01:00:23,760 Speaker 1: you know, so supportive of my career and he's been 1056 01:00:23,960 --> 01:00:26,640 Speaker 1: very supportive of this book. And and you know, I 1057 01:00:26,640 --> 01:00:31,000 Speaker 1: mean I think Arthur is the son of a politician, 1058 01:00:31,600 --> 01:00:33,920 Speaker 1: and I think that his father was New York State 1059 01:00:34,120 --> 01:00:37,360 Speaker 1: Controller of Memory, Sir and actually one of the longest 1060 01:00:37,400 --> 01:00:40,560 Speaker 1: running controllers in history. And I think Arthur might have 1061 01:00:40,560 --> 01:00:44,160 Speaker 1: been one of the longest running SEC chairman. I think 1062 01:00:44,200 --> 01:00:47,200 Speaker 1: that he is the longest running one. Yeah. Um, so 1063 01:00:47,240 --> 01:00:52,960 Speaker 1: he knew you could relate to somebody who of a 1064 01:00:53,040 --> 01:00:55,360 Speaker 1: famous father. That can't be the easiest thing in the 1065 01:00:55,400 --> 01:00:57,880 Speaker 1: world to deal with. Yeah. And then well, professionally, I 1066 01:00:57,920 --> 01:01:02,240 Speaker 1: mean like that Joel green Block class was very important 1067 01:01:02,480 --> 01:01:04,640 Speaker 1: for me. And then at my first job, like I 1068 01:01:04,680 --> 01:01:07,800 Speaker 1: worked at kind of a dysfunctional hedge fund, but I 1069 01:01:07,840 --> 01:01:11,400 Speaker 1: had the director of research at that job was this 1070 01:01:11,400 --> 01:01:15,080 Speaker 1: guy named Greg Schrock. Um. He had been um a 1071 01:01:15,080 --> 01:01:18,160 Speaker 1: walked out Lipton lawyer in the like in the early eighties, 1072 01:01:18,200 --> 01:01:21,640 Speaker 1: and um experience, he just knew so much and like 1073 01:01:21,800 --> 01:01:24,440 Speaker 1: was always you know what really took the time to 1074 01:01:24,560 --> 01:01:28,600 Speaker 1: kind of but what to show me, like the right 1075 01:01:28,640 --> 01:01:31,000 Speaker 1: things like to read and like to ask the right 1076 01:01:31,200 --> 01:01:35,400 Speaker 1: you know, you know, questions about public companies. So he 1077 01:01:35,520 --> 01:01:38,360 Speaker 1: was a big fan of your blog. Yeah. Oh that's 1078 01:01:38,400 --> 01:01:42,040 Speaker 1: a small world. Um. Every now and then someone out 1079 01:01:42,040 --> 01:01:44,120 Speaker 1: of the blue will say that to me and I 1080 01:01:44,160 --> 01:01:49,400 Speaker 1: don't know how to UM. I won't mention his name, UM, 1081 01:01:49,440 --> 01:01:52,560 Speaker 1: but a household name. One day says to me, Oh, 1082 01:01:52,600 --> 01:01:54,040 Speaker 1: I'm a fan of the blog. I've been reading it 1083 01:01:54,080 --> 01:01:56,720 Speaker 1: for years and I just responded with an export of 1084 01:01:57,240 --> 01:02:00,280 Speaker 1: b S. And he's like, no, really, my my son 1085 01:02:00,360 --> 01:02:02,760 Speaker 1: read it. He turned me onto it years ago. I 1086 01:02:02,800 --> 01:02:05,439 Speaker 1: read it every morning, and it's really it's just such 1087 01:02:05,480 --> 01:02:10,720 Speaker 1: a weird. So when you are somewhat quasi public, it's 1088 01:02:10,760 --> 01:02:14,320 Speaker 1: it's really startling. You. Do you ever have an experience 1089 01:02:14,320 --> 01:02:17,600 Speaker 1: with someone knows you because of your dad and talks 1090 01:02:17,640 --> 01:02:20,040 Speaker 1: to you like they know you as not in years? 1091 01:02:20,200 --> 01:02:24,000 Speaker 1: I mean, I mean I think he's Um, he's just 1092 01:02:24,480 --> 01:02:27,240 Speaker 1: we noble, more under the radar and retired. But like, 1093 01:02:27,320 --> 01:02:29,960 Speaker 1: for sure, when we were doing the touring stuff, like 1094 01:02:30,000 --> 01:02:33,200 Speaker 1: you sometimes like we'd be playing in like you know, Jackson, 1095 01:02:33,200 --> 01:02:36,560 Speaker 1: Mississippi or something and there'd be this like contingent of 1096 01:02:36,680 --> 01:02:41,920 Speaker 1: young Republicans there, which totally baffling. So that occasionally happened, 1097 01:02:42,080 --> 01:02:47,560 Speaker 1: but but not that much. And UM, that's that's really interesting. 1098 01:02:47,640 --> 01:02:51,440 Speaker 1: So you talk about so many different investors in the book, 1099 01:02:52,360 --> 01:02:58,040 Speaker 1: Ben Graham, Warren Buffett. Obviously, what what other investors influenced? UM? 1100 01:02:58,160 --> 01:03:02,160 Speaker 1: You're investing your thought, sess. I mean I do think 1101 01:03:02,600 --> 01:03:05,880 Speaker 1: for me, it really kind of all all um all 1102 01:03:05,920 --> 01:03:08,760 Speaker 1: boils back to Buffett, like he kind of covers all 1103 01:03:08,760 --> 01:03:12,880 Speaker 1: the bases with his writing. Um, like I certainly I 1104 01:03:12,920 --> 01:03:15,480 Speaker 1: read all the Monger speeches, like I read all of 1105 01:03:15,480 --> 01:03:18,680 Speaker 1: the Seth Carmen stuff. You know, so like when Klarman 1106 01:03:18,720 --> 01:03:21,800 Speaker 1: has an article or a speech. But um, I actually 1107 01:03:21,800 --> 01:03:24,120 Speaker 1: just put a Klarman video up on the blog over 1108 01:03:24,120 --> 01:03:26,400 Speaker 1: the weekend. You gotta get him on the show. Um, 1109 01:03:26,440 --> 01:03:28,840 Speaker 1: he's kind of a recluse. He doesn't do a lot 1110 01:03:28,840 --> 01:03:31,439 Speaker 1: of video, a lot of a lot of media, even 1111 01:03:31,480 --> 01:03:34,520 Speaker 1: though this is not the typical media. But I feel 1112 01:03:34,520 --> 01:03:37,800 Speaker 1: free to make an interception. He's but he seems very funny, 1113 01:03:37,800 --> 01:03:41,040 Speaker 1: like I've seen him in these fireside chats or or 1114 01:03:41,040 --> 01:03:44,160 Speaker 1: I've seen him, you know, give talks and and um 1115 01:03:44,160 --> 01:03:46,640 Speaker 1: he's engaging and funny. All right, So we'll we'll reach 1116 01:03:46,680 --> 01:03:48,920 Speaker 1: out to Seth. If you're listening, we'd love to have you. 1117 01:03:49,720 --> 01:03:51,280 Speaker 1: We'd love to have you on the show because you know, 1118 01:03:51,400 --> 01:03:54,800 Speaker 1: ninety minutes in, you know, Seth Klarmer's hanging on every 1119 01:03:54,880 --> 01:03:58,760 Speaker 1: every word. Let's let's talk about books. Um, what books 1120 01:03:58,760 --> 01:04:03,080 Speaker 1: have you enjoyed be um, be they investing or non investing, 1121 01:04:03,120 --> 01:04:06,800 Speaker 1: fiction or nonfiction? What books have really influenced you? Okay, 1122 01:04:06,840 --> 01:04:10,280 Speaker 1: well I'm up begin with the business ones. I mean, um, 1123 01:04:10,320 --> 01:04:13,360 Speaker 1: I do love business books. I've you know, doing this 1124 01:04:13,400 --> 01:04:17,040 Speaker 1: book I got to read, you know, so many incredible 1125 01:04:17,080 --> 01:04:20,479 Speaker 1: business books. You know, just if you look at GM, 1126 01:04:20,520 --> 01:04:24,200 Speaker 1: like the library of sure of of incredible books about 1127 01:04:24,400 --> 01:04:27,800 Speaker 1: GM is just incredible. There's like the Offered Sloan book 1128 01:04:28,120 --> 01:04:30,840 Speaker 1: My Years with General Motors, and if you read that's 1129 01:04:30,840 --> 01:04:34,919 Speaker 1: pretty old rights or something like the sixties. And then 1130 01:04:35,040 --> 01:04:38,960 Speaker 1: if you read that alongside the John Delorian book about 1131 01:04:39,000 --> 01:04:43,800 Speaker 1: the decline of GM, you know, from a distance, you uh, 1132 01:04:44,160 --> 01:04:46,720 Speaker 1: on a clear day, you can see general motors. Like 1133 01:04:46,760 --> 01:04:49,840 Speaker 1: if you read those two books and the the Chapter 1134 01:04:50,240 --> 01:04:54,640 Speaker 1: and Peter Drucker's Adventures of a Bystander about a Sloan, 1135 01:04:55,200 --> 01:04:58,520 Speaker 1: that's incredible reading. Um. You know, like I like a 1136 01:04:58,640 --> 01:05:02,200 Speaker 1: journalistic business book, like um, I loved all of the 1137 01:05:02,320 --> 01:05:06,000 Speaker 1: late eighties, you know, corporate water books like A Predator's Ball, 1138 01:05:06,400 --> 01:05:10,040 Speaker 1: Den of Thieves. Obviously love Michael Lewis. I assume that 1139 01:05:10,160 --> 01:05:12,960 Speaker 1: everyone's it's like you need to begin to ask, like 1140 01:05:13,000 --> 01:05:16,840 Speaker 1: what's your favorite Michael Lewis book as opposed to I 1141 01:05:16,920 --> 01:05:20,800 Speaker 1: will tell I often tell people, I know you've read 1142 01:05:21,000 --> 01:05:24,360 Speaker 1: Flash Boys, in the Big Short and money Ball, but 1143 01:05:24,440 --> 01:05:26,280 Speaker 1: have you read a New New Thing? Because a lot 1144 01:05:26,320 --> 01:05:29,880 Speaker 1: of people that it's a really really good book. Yeah. 1145 01:05:29,920 --> 01:05:32,080 Speaker 1: I think in a like in a funny way. At 1146 01:05:32,120 --> 01:05:34,920 Speaker 1: the time, that was among his you know, you know, 1147 01:05:35,680 --> 01:05:39,320 Speaker 1: a better received books, you know, because because like he 1148 01:05:39,400 --> 01:05:43,120 Speaker 1: don't think it is as it was a popular yeah, 1149 01:05:43,120 --> 01:05:46,040 Speaker 1: I mean, but you know he had had Lars Poker, 1150 01:05:46,080 --> 01:05:49,800 Speaker 1: which was great, and then that you know, you know, 1151 01:05:50,720 --> 01:05:52,760 Speaker 1: I made a splash like on the release, like the 1152 01:05:52,760 --> 01:05:55,920 Speaker 1: New New Thing did um? You know, I love a boomerang. 1153 01:05:56,160 --> 01:05:58,200 Speaker 1: I think that's my favorite one of his. That's his 1154 01:05:58,600 --> 01:06:03,760 Speaker 1: collection Vanity Fair Right. I love the story of going 1155 01:06:03,880 --> 01:06:08,280 Speaker 1: to the Greek monastery? Right, How how astonishing is that tale? 1156 01:06:08,480 --> 01:06:11,160 Speaker 1: That whole thing? I mean, I remember in the in 1157 01:06:11,960 --> 01:06:14,960 Speaker 1: the Germany chapter, I was, you know, crying tears, you know, So, 1158 01:06:15,120 --> 01:06:16,880 Speaker 1: I mean, you know, I love that kind of writing. 1159 01:06:16,960 --> 01:06:21,080 Speaker 1: The Tracy Kidder, you know, Michael Lewis, I loved what's 1160 01:06:21,080 --> 01:06:26,000 Speaker 1: the Tracy Kidder? Well? Well, so he did a soul 1161 01:06:26,000 --> 01:06:28,040 Speaker 1: of a new machine, right, So you know that was 1162 01:06:28,080 --> 01:06:32,520 Speaker 1: like among his Um, I'm his first book. Um, he's like, 1163 01:06:32,560 --> 01:06:36,280 Speaker 1: I'm among like the first like of these like immersion 1164 01:06:36,360 --> 01:06:41,160 Speaker 1: journalist types. So um, I think my favorite of his 1165 01:06:41,280 --> 01:06:44,760 Speaker 1: is a recent one, Mountains Beyond Mountains. It's about uh 1166 01:06:45,560 --> 01:06:49,640 Speaker 1: uh Paul Farmer that the Doctors without Borders guy, but 1167 01:06:49,720 --> 01:06:53,120 Speaker 1: he did house Hometown. I mean, he's a he's a 1168 01:06:53,160 --> 01:06:55,320 Speaker 1: fantastic write. It sounds like you're you've worked through it 1169 01:06:55,360 --> 01:06:57,640 Speaker 1: through the whole genre I wrote, I wrote all Free 1170 01:06:57,680 --> 01:07:02,680 Speaker 1: Down any any anybody else stand out? Um, I would say, 1171 01:07:03,440 --> 01:07:05,720 Speaker 1: you know, like when young people come to talk to 1172 01:07:05,760 --> 01:07:09,200 Speaker 1: me about will value investing, I'm always shocked when they 1173 01:07:09,200 --> 01:07:11,840 Speaker 1: have not read the Snowball. You know, they'll have read 1174 01:07:11,840 --> 01:07:15,200 Speaker 1: the Lonestein book, which is great. They'll like, like, I've 1175 01:07:15,200 --> 01:07:18,440 Speaker 1: read which was one of the first Lonstein tells us 1176 01:07:18,480 --> 01:07:20,440 Speaker 1: so he was a guest on the show. He tells 1177 01:07:20,480 --> 01:07:23,760 Speaker 1: the story that he went to Buffett about having access 1178 01:07:23,760 --> 01:07:26,560 Speaker 1: in order to do the book, and Buffett says, probably 1179 01:07:26,600 --> 01:07:30,200 Speaker 1: better off without access and and hearing what other people 1180 01:07:30,240 --> 01:07:32,280 Speaker 1: have to say instead of me telling the story. And 1181 01:07:32,320 --> 01:07:34,040 Speaker 1: he said it was good advice. The book turned out 1182 01:07:34,080 --> 01:07:37,320 Speaker 1: to be much better. Otherwise it's a it's a great book. 1183 01:07:37,400 --> 01:07:40,760 Speaker 1: Making of a Capitalist is that, you know, are the 1184 01:07:40,840 --> 01:07:45,600 Speaker 1: making of a modern cap American capitalists. But but the 1185 01:07:45,640 --> 01:07:50,000 Speaker 1: Snowball has the access, and the access is incredibly valuable. 1186 01:07:50,600 --> 01:07:53,160 Speaker 1: And it blows my mind that these you know, well 1187 01:07:53,560 --> 01:07:56,040 Speaker 1: young kids who are obsessed with Buffett have not read 1188 01:07:56,080 --> 01:07:59,440 Speaker 1: that book. I think it's a shame that like that 1189 01:07:59,480 --> 01:08:03,560 Speaker 1: book is not, um like as popular as it should be. 1190 01:08:04,000 --> 01:08:07,919 Speaker 1: The Making of an American Capitalist. Well, I mean it's 1191 01:08:07,920 --> 01:08:12,520 Speaker 1: five star reviews and it's it was extremely well reviewed. 1192 01:08:12,600 --> 01:08:16,479 Speaker 1: I thought it sold pretty well, but uh, certainly not 1193 01:08:16,479 --> 01:08:20,160 Speaker 1: nothing like um when Genius failed, which was well, I'm 1194 01:08:20,160 --> 01:08:24,080 Speaker 1: talking about this. The Snowball is the okays, the big one, 1195 01:08:24,520 --> 01:08:29,320 Speaker 1: like Schroder, How how did Snowball sell? I think it 1196 01:08:29,400 --> 01:08:33,519 Speaker 1: did well, But I think like they were kind of 1197 01:08:33,560 --> 01:08:37,840 Speaker 1: a banking on Buffett supporting it, and he ultimately like 1198 01:08:37,920 --> 01:08:42,799 Speaker 1: withdrew his like, um, you know, his involvement, and Alice 1199 01:08:42,800 --> 01:08:46,760 Speaker 1: Schroeder has been working with him for forever, right she's yeah, 1200 01:08:46,840 --> 01:08:48,920 Speaker 1: but I think like at some point like they had 1201 01:08:48,920 --> 01:08:51,400 Speaker 1: a falling out, and you know, I mean it's funny 1202 01:08:51,439 --> 01:08:54,400 Speaker 1: so this year, like, um, I go to the the 1203 01:08:54,400 --> 01:08:57,960 Speaker 1: Berkshire um Hathaway meeting every year, but this year, but 1204 01:08:57,960 --> 01:08:59,680 Speaker 1: it was like the first time that I did the 1205 01:08:59,680 --> 01:09:02,519 Speaker 1: book thing, and there's all these book events and that 1206 01:09:02,560 --> 01:09:05,720 Speaker 1: book was invisible at that meeting. Really yeah, and I 1207 01:09:05,720 --> 01:09:07,559 Speaker 1: didn't know that. I didn't know they had a falling out, 1208 01:09:07,600 --> 01:09:10,240 Speaker 1: I thought, and it's the best one. It's it's it's 1209 01:09:10,320 --> 01:09:14,400 Speaker 1: just um just they're like our some vignettes and they're like, 1210 01:09:14,920 --> 01:09:18,200 Speaker 1: you know, you know when like the like this, like 1211 01:09:18,439 --> 01:09:22,439 Speaker 1: the Solomon Aboard Will tries like to tell Charlie Munger 1212 01:09:22,600 --> 01:09:27,120 Speaker 1: like about like the things that like that they've uncovered, 1213 01:09:27,120 --> 01:09:29,559 Speaker 1: and he, let you know, immediately will cease through all 1214 01:09:29,560 --> 01:09:31,960 Speaker 1: the bs and begins like to ask all the like 1215 01:09:32,000 --> 01:09:34,880 Speaker 1: the like like who talked to whom? Will win? You know? Who? 1216 01:09:34,880 --> 01:09:37,000 Speaker 1: Did you know? I just I mean, all of these 1217 01:09:37,520 --> 01:09:41,400 Speaker 1: um inside stories in that book are incredible snowball. Yeah, 1218 01:09:41,680 --> 01:09:43,479 Speaker 1: I actually have not read you got to read it. 1219 01:09:43,560 --> 01:09:46,200 Speaker 1: I'm gonna put that on my list. You mentioned Monger. 1220 01:09:46,280 --> 01:09:49,400 Speaker 1: Have you read a port Charlie's Almanac? I have. It's great, 1221 01:09:49,600 --> 01:09:54,519 Speaker 1: It's it's um it's on my nights. It's a tone 1222 01:09:54,720 --> 01:09:57,280 Speaker 1: I'm slowly working. Well, like you just got to read 1223 01:09:57,560 --> 01:10:00,240 Speaker 1: the speeches, you know, but it's funny. I mean, I 1224 01:10:00,320 --> 01:10:03,840 Speaker 1: mean I love that stuff. But I do think that sometimes, 1225 01:10:04,360 --> 01:10:08,120 Speaker 1: you know, well, from an investing perspective, like that we 1226 01:10:08,280 --> 01:10:14,960 Speaker 1: as an industry um overdue like the kind of thinking clearly. 1227 01:10:15,000 --> 01:10:19,760 Speaker 1: So I think it's important like like like for individual investors, 1228 01:10:19,800 --> 01:10:24,200 Speaker 1: like like like to understand the nature of misjudgment and 1229 01:10:24,200 --> 01:10:27,960 Speaker 1: and psychological bias. But at the same time, I think 1230 01:10:28,040 --> 01:10:32,280 Speaker 1: like that we as an industry have like perpetrated this 1231 01:10:32,360 --> 01:10:34,880 Speaker 1: idea that that if I pick stocks that I'm like 1232 01:10:35,800 --> 01:10:38,680 Speaker 1: that it's like a game of wits, and I'm like 1233 01:10:38,680 --> 01:10:41,439 Speaker 1: like the wiser guy than the person on the other 1234 01:10:41,479 --> 01:10:44,040 Speaker 1: side of the trade. And and like, to me, the 1235 01:10:44,080 --> 01:10:46,120 Speaker 1: longer that you do it, the more that you realize 1236 01:10:46,160 --> 01:10:50,480 Speaker 1: that you're just trying to not make mistakes and door 1237 01:10:51,320 --> 01:10:54,960 Speaker 1: most most investors. Any other books before we go on 1238 01:10:55,000 --> 01:10:57,360 Speaker 1: to some more questions, I mean I could talk books 1239 01:10:57,400 --> 01:11:00,559 Speaker 1: for hours. Yeah, I mean, like I really love uh 1240 01:11:00,640 --> 01:11:03,360 Speaker 1: you know, pop science books, and and and and I 1241 01:11:03,400 --> 01:11:07,200 Speaker 1: love music books. So give me you one of each, Okay. So, 1242 01:11:07,200 --> 01:11:10,120 Speaker 1: so there's two great music books, Please Kill Me, which 1243 01:11:10,160 --> 01:11:12,000 Speaker 1: is like an ortal history of punk rock, and then 1244 01:11:12,600 --> 01:11:16,040 Speaker 1: The Motley Crew a memoir you know, written by Neil 1245 01:11:16,080 --> 01:11:20,360 Speaker 1: Strauss is incredible. Uh, pop science I love Wait before 1246 01:11:20,400 --> 01:11:23,000 Speaker 1: you move beyond music, I have a few books to 1247 01:11:23,040 --> 01:11:27,040 Speaker 1: ask you some questions. So David Byrne's Musicology, I didn't 1248 01:11:27,040 --> 01:11:29,040 Speaker 1: read it. You should read it. I know. It's really 1249 01:11:29,080 --> 01:11:32,240 Speaker 1: I'm behind now because of writing the book, of doing 1250 01:11:32,280 --> 01:11:34,960 Speaker 1: my book, writing a book like that, like the Patti 1251 01:11:35,000 --> 01:11:37,120 Speaker 1: Smith I haven't read. I haven't read the David Byrne. 1252 01:11:37,200 --> 01:11:39,840 Speaker 1: I have Chris So, I haven't read Chrissy Hines. It's 1253 01:11:39,840 --> 01:11:41,679 Speaker 1: also it's on a it's not on the night table, 1254 01:11:42,000 --> 01:11:44,600 Speaker 1: it's on the dresser, which is the next while the 1255 01:11:44,640 --> 01:11:48,920 Speaker 1: other book that's really kind of interesting. It sort of 1256 01:11:49,439 --> 01:11:53,000 Speaker 1: pre dates you a little bit, is uh Nick hornby 1257 01:11:53,479 --> 01:11:58,360 Speaker 1: High Fidelity. Yeah, if you've never read that is fantastic. 1258 01:11:58,520 --> 01:12:01,640 Speaker 1: And it's actually in the movie. Um, you know my 1259 01:12:01,720 --> 01:12:05,679 Speaker 1: band has a poster in their record stuff really awesome. 1260 01:12:06,000 --> 01:12:08,920 Speaker 1: At the time, it was extremely exciting, like, oh, that's like, oh, 1261 01:12:08,920 --> 01:12:12,080 Speaker 1: we're making it big our posters in this movie. First 1262 01:12:12,080 --> 01:12:17,000 Speaker 1: of all, I love that movie for countless countless reasons. Um, 1263 01:12:17,040 --> 01:12:20,040 Speaker 1: not the least of which is when you finally get 1264 01:12:20,080 --> 01:12:24,320 Speaker 1: to the end and Jack Black takes the stage. Everybody 1265 01:12:24,520 --> 01:12:27,960 Speaker 1: exploded at that point. But but I read the book 1266 01:12:28,080 --> 01:12:31,280 Speaker 1: years before and reluctantly went into the film because you 1267 01:12:31,280 --> 01:12:32,960 Speaker 1: know what it's like when you read a book and 1268 01:12:32,960 --> 01:12:35,280 Speaker 1: then the movie is terrible, and then the movie is 1269 01:12:35,400 --> 01:12:38,840 Speaker 1: different enough that you could see their trying for something else. 1270 01:12:39,120 --> 01:12:42,920 Speaker 1: But it's true enough to the attitude. Yeah, it really 1271 01:12:43,040 --> 01:12:46,880 Speaker 1: really Um. Two recommendations, high fidelity the book and high 1272 01:12:46,880 --> 01:12:51,040 Speaker 1: fidelity um the movies. Um. So let's go to popular science, 1273 01:12:51,880 --> 01:12:54,400 Speaker 1: Like I love like the journalistic ones where they get out, 1274 01:12:55,000 --> 01:12:58,759 Speaker 1: Like there's a book called The Song of the Dodo, okay, 1275 01:12:58,840 --> 01:13:05,320 Speaker 1: and it's about extincts and an extinction on extinction on islands, 1276 01:13:06,320 --> 01:13:09,160 Speaker 1: and it's it's just like it's a really fun book. 1277 01:13:09,200 --> 01:13:11,080 Speaker 1: Like he travels like the world and he goes to 1278 01:13:11,600 --> 01:13:14,400 Speaker 1: like to like kind of all these islands. And many 1279 01:13:14,439 --> 01:13:17,320 Speaker 1: years ago I read Douglas Adam's Last Chance to See 1280 01:13:17,680 --> 01:13:19,479 Speaker 1: the same thing. I read that, But so you read 1281 01:13:19,560 --> 01:13:21,320 Speaker 1: you read it. So he just goes around and looking 1282 01:13:21,360 --> 01:13:25,200 Speaker 1: at these creatures that are on the verge of extinction extinction, 1283 01:13:25,280 --> 01:13:28,400 Speaker 1: and some of them between the time he visited in 1284 01:13:28,479 --> 01:13:30,960 Speaker 1: the book came out. He said, Oh, and since then 1285 01:13:31,120 --> 01:13:33,120 Speaker 1: you can't see this because it's yeah, I mean I 1286 01:13:33,120 --> 01:13:36,160 Speaker 1: always thought like that, well, one day I would take 1287 01:13:36,200 --> 01:13:39,160 Speaker 1: some time from work and do a science book, like, 1288 01:13:39,280 --> 01:13:41,080 Speaker 1: but then I like, I had like a book idea 1289 01:13:41,120 --> 01:13:44,840 Speaker 1: about you know, that's something that I knew about, so like, 1290 01:13:44,960 --> 01:13:48,200 Speaker 1: you know, and made much more sense to give me 1291 01:13:48,240 --> 01:13:51,120 Speaker 1: one more science book. I like The Beak of the Finch. 1292 01:13:51,240 --> 01:13:54,200 Speaker 1: That's also yeah, it's a it's a little bit of 1293 01:13:54,240 --> 01:13:58,160 Speaker 1: like an inside account of these um you know, well 1294 01:13:58,280 --> 01:14:02,280 Speaker 1: um um academic researchers in the Galapa Ghosts, and it 1295 01:14:02,320 --> 01:14:04,920 Speaker 1: gives you a feel like these people have devoted their lives, 1296 01:14:04,960 --> 01:14:07,519 Speaker 1: like they go back to the Galapa Ghosts every summer 1297 01:14:07,560 --> 01:14:11,080 Speaker 1: for thirty years, and it gives you a feel for 1298 01:14:11,200 --> 01:14:13,679 Speaker 1: kind of like how you know, what committed you would 1299 01:14:13,680 --> 01:14:17,120 Speaker 1: have to be to be a scientist. It's insane. So 1300 01:14:17,120 --> 01:14:22,240 Speaker 1: sounds to me like you're one of them new fangled evolutionaries. Well, 1301 01:14:22,280 --> 01:14:25,240 Speaker 1: I do like all those, like like the Stephen J. 1302 01:14:25,400 --> 01:14:27,599 Speaker 1: Gould books and like as a kid that like I 1303 01:14:27,640 --> 01:14:30,760 Speaker 1: loved Darwin all that stuff. So yeah, I mean like 1304 01:14:30,800 --> 01:14:33,479 Speaker 1: the idea that like, I mean, even if you don't 1305 01:14:33,479 --> 01:14:37,800 Speaker 1: believe in Darwin, the book is just like to read 1306 01:14:37,840 --> 01:14:39,720 Speaker 1: the book and to see, like his reasoning, it's an 1307 01:14:39,760 --> 01:14:43,479 Speaker 1: incredible learning experience. It happened to not teach it even 1308 01:14:43,479 --> 01:14:46,680 Speaker 1: if it's wrong. It's so compelling. I don't know. I 1309 01:14:46,800 --> 01:14:49,880 Speaker 1: found it hard to get through that book and say, oh, 1310 01:14:49,960 --> 01:14:52,280 Speaker 1: all this stuff is made. I mean, it's got that 1311 01:14:52,400 --> 01:14:55,639 Speaker 1: magical thing that some books have, where like you read it, 1312 01:14:56,200 --> 01:14:59,519 Speaker 1: and after like you read it, it it just seems obvious that, well, 1313 01:14:59,600 --> 01:15:03,760 Speaker 1: that's always the tell of a really brilliant idea, is 1314 01:15:03,840 --> 01:15:08,880 Speaker 1: that how your hindsight bias after the fact that well, 1315 01:15:08,880 --> 01:15:12,920 Speaker 1: of course we believe this intuitively know this. Obviously, there's 1316 01:15:12,960 --> 01:15:14,920 Speaker 1: a wonderful book if you want to look into So 1317 01:15:15,040 --> 01:15:16,599 Speaker 1: this is all biology. If you want to look at 1318 01:15:16,600 --> 01:15:20,200 Speaker 1: the physics side. James Glick did a book called Chaos, 1319 01:15:20,800 --> 01:15:24,040 Speaker 1: and after you finished that, you're like, oh, of course, 1320 01:15:24,120 --> 01:15:26,439 Speaker 1: how how how else could you have looked at this 1321 01:15:26,720 --> 01:15:29,960 Speaker 1: when going into it you had no idea on the 1322 01:15:30,000 --> 01:15:33,439 Speaker 1: science of chaos theory as applied to physics. You couldn't 1323 01:15:33,479 --> 01:15:36,599 Speaker 1: a million years have a managin that. And then afterwards 1324 01:15:36,640 --> 01:15:39,320 Speaker 1: it's like, oh, of course it's that same sort of 1325 01:15:40,160 --> 01:15:43,479 Speaker 1: same sort of magic. Um. So let's let's talk a 1326 01:15:43,479 --> 01:15:47,719 Speaker 1: little bit about things. I think we've covered books pretty 1327 01:15:47,760 --> 01:15:51,040 Speaker 1: well right before. Before I move on, let's talk a 1328 01:15:51,040 --> 01:15:55,599 Speaker 1: little bit about UM. What's changed since you've joined the 1329 01:15:55,600 --> 01:15:58,720 Speaker 1: hedge fund industry. You've been doing this for better more 1330 01:15:58,760 --> 01:16:01,920 Speaker 1: than a decade and chain, how have things changed on 1331 01:16:01,960 --> 01:16:06,960 Speaker 1: that side of the street since the early two thousand's? Sure, well, 1332 01:16:07,320 --> 01:16:09,200 Speaker 1: in some sense, I'm not the right guy to ask, 1333 01:16:09,240 --> 01:16:12,360 Speaker 1: because I work at a like a small fund that's 1334 01:16:12,360 --> 01:16:16,120 Speaker 1: like that's on the fringes, UM. But you know, to 1335 01:16:16,240 --> 01:16:19,040 Speaker 1: the extent I've seen things that changed, They've gotten a 1336 01:16:19,080 --> 01:16:23,400 Speaker 1: lot more mature, a lot more institutionalized, UM. As we 1337 01:16:23,520 --> 01:16:26,799 Speaker 1: talked about UM on the on on the radio segment, 1338 01:16:26,880 --> 01:16:29,640 Speaker 1: like when I got my first job in the industry, 1339 01:16:29,720 --> 01:16:34,040 Speaker 1: like like you know, I mean, anyone on the trading 1340 01:16:34,080 --> 01:16:36,479 Speaker 1: desk if they had an idea, like it could go 1341 01:16:36,520 --> 01:16:38,599 Speaker 1: in the portfolio, and like you know, when you could 1342 01:16:38,600 --> 01:16:40,840 Speaker 1: write thirteen d s and it was just a crazy time. 1343 01:16:41,479 --> 01:16:45,280 Speaker 1: And now it's a lot more institutionalized. And and you know, 1344 01:16:45,400 --> 01:16:49,320 Speaker 1: with that will comes I think like a lot of 1345 01:16:49,360 --> 01:16:52,080 Speaker 1: good things, like I assume, like we'll risk controls are 1346 01:16:52,120 --> 01:16:54,640 Speaker 1: like a like a way better. I might assume the 1347 01:16:54,720 --> 01:16:58,639 Speaker 1: blow ups are less pedestrian. But then there's also it's 1348 01:16:58,720 --> 01:17:03,519 Speaker 1: just like you see this, you know, a pedigree matters 1349 01:17:03,560 --> 01:17:05,840 Speaker 1: now in this way that like like I didn't before 1350 01:17:05,880 --> 01:17:08,360 Speaker 1: if like you came out of a of a good shop, 1351 01:17:08,600 --> 01:17:10,720 Speaker 1: then it's like, you know, it's a difference. Yeah, and 1352 01:17:11,000 --> 01:17:13,080 Speaker 1: so see that kind of thing is happening now. And 1353 01:17:13,120 --> 01:17:15,080 Speaker 1: you see that on the quand side as well. A 1354 01:17:15,200 --> 01:17:18,000 Speaker 1: lot of what you're what you're you came from Renaissance, 1355 01:17:18,040 --> 01:17:20,800 Speaker 1: so like you're gonna be good at this, right, you know, 1356 01:17:21,200 --> 01:17:24,320 Speaker 1: I don't. I mean there's no I mean, like in 1357 01:17:24,320 --> 01:17:27,120 Speaker 1: our business, it's a lot about how how hard you work. 1358 01:17:27,200 --> 01:17:30,880 Speaker 1: There's not lots of of of of special sauce. You 1359 01:17:30,920 --> 01:17:36,760 Speaker 1: know that makes sense. So, um, so we're down to 1360 01:17:36,800 --> 01:17:39,360 Speaker 1: our last two questions. These are my two favorite questions 1361 01:17:39,360 --> 01:17:42,479 Speaker 1: I asked all of my guests. You mentioned occasionally you 1362 01:17:42,520 --> 01:17:46,000 Speaker 1: have millennials come to you. What sort of advice would 1363 01:17:46,000 --> 01:17:48,439 Speaker 1: you give to a millennial or someone just starting their 1364 01:17:48,439 --> 01:17:51,439 Speaker 1: career and and said to you, I'm interested in the 1365 01:17:51,439 --> 01:17:54,800 Speaker 1: career of finance. How would you answer that question? Yeah, Well, 1366 01:17:54,840 --> 01:17:58,639 Speaker 1: for the millennials, like you know, and my students, like, like, 1367 01:17:58,680 --> 01:18:00,360 Speaker 1: the first thing I say is like all of the 1368 01:18:00,680 --> 01:18:03,799 Speaker 1: Like the the cliches about will get to work first, 1369 01:18:03,840 --> 01:18:08,280 Speaker 1: like in hard work are are totally true and and 1370 01:18:08,320 --> 01:18:11,080 Speaker 1: you'd be surprised that, you know, well how a few 1371 01:18:11,080 --> 01:18:15,760 Speaker 1: people act on them. Really I think so um, um, 1372 01:18:15,800 --> 01:18:22,600 Speaker 1: I tell people you know that, I mean that ultimately 1373 01:18:23,600 --> 01:18:27,960 Speaker 1: you're like a smart kid and you have good judgment, 1374 01:18:28,960 --> 01:18:32,080 Speaker 1: and like your judgment over time will develop. But at 1375 01:18:32,120 --> 01:18:35,960 Speaker 1: these early jobs and as like you learned the business, Um, 1376 01:18:36,000 --> 01:18:38,559 Speaker 1: you're really being paid to do work, like to learn 1377 01:18:38,600 --> 01:18:42,840 Speaker 1: to do research, like like you're not being paid to 1378 01:18:42,880 --> 01:18:47,920 Speaker 1: be wise, And I think that's like that that's you 1379 01:18:47,960 --> 01:18:49,960 Speaker 1: know one thing that like I like, I see a 1380 01:18:50,000 --> 01:18:52,120 Speaker 1: lot in my students, as you know, they want to 1381 01:18:52,120 --> 01:18:55,320 Speaker 1: sit and think big thoughts about a company, Like they're 1382 01:18:55,400 --> 01:18:58,720 Speaker 1: less inclined to like to do the hard work it 1383 01:18:58,800 --> 01:19:02,040 Speaker 1: takes to find the expert that's out there that can 1384 01:19:02,080 --> 01:19:03,800 Speaker 1: really explain it to you. And that's the way that 1385 01:19:03,840 --> 01:19:07,800 Speaker 1: our business works. You Like, you're doing work to find 1386 01:19:07,800 --> 01:19:10,280 Speaker 1: the experts, like like you don't just like lean back 1387 01:19:10,320 --> 01:19:13,120 Speaker 1: in your chair and say I'm gonna out with the 1388 01:19:13,320 --> 01:19:15,320 Speaker 1: like the whole market and so like, like I really 1389 01:19:15,360 --> 01:19:19,759 Speaker 1: try to tell them it's less about your you know, wisdom, 1390 01:19:20,200 --> 01:19:22,479 Speaker 1: like like like a judgment. Then you think, and at 1391 01:19:22,520 --> 01:19:24,759 Speaker 1: your first job, you're gonna be paid to do hard work. 1392 01:19:25,280 --> 01:19:28,000 Speaker 1: You're the grunts. When you're starting out, you're doing and 1393 01:19:28,040 --> 01:19:31,120 Speaker 1: that's pretty much true in every profession. You start out 1394 01:19:31,120 --> 01:19:33,320 Speaker 1: as a lawyer, you're doing the grunt work. In the library, 1395 01:19:33,360 --> 01:19:38,439 Speaker 1: it's miserable. Who wants to build six three thou hours 1396 01:19:39,040 --> 01:19:42,400 Speaker 1: a year? And finance is not all that different well, 1397 01:19:42,840 --> 01:19:47,960 Speaker 1: I mean specifically in terms of a finance um. I 1398 01:19:47,960 --> 01:19:49,599 Speaker 1: mean I don't give a lot of advice on if 1399 01:19:49,600 --> 01:19:51,559 Speaker 1: it's the right job or the I mean, I mean 1400 01:19:51,600 --> 01:19:55,320 Speaker 1: only they know that. I mean obviously investing is extremely 1401 01:19:55,320 --> 01:19:59,679 Speaker 1: fun and it's a great job, but I do think 1402 01:19:59,680 --> 01:20:01,600 Speaker 1: they need to be in it because they like doing it. 1403 01:20:01,720 --> 01:20:04,200 Speaker 1: I mean, if you go in it just for the money, 1404 01:20:04,400 --> 01:20:06,559 Speaker 1: you're going to be sadly disappointed. I'm sure that you've 1405 01:20:06,560 --> 01:20:09,160 Speaker 1: seen this where like like you'll talk I mean, in fact, 1406 01:20:09,160 --> 01:20:11,000 Speaker 1: like I talked to someone will not that long ago 1407 01:20:11,040 --> 01:20:14,600 Speaker 1: that was like an undergraduate that was extremely into biology 1408 01:20:15,920 --> 01:20:19,120 Speaker 1: and like you know, they had this whole idea of like, 1409 01:20:19,280 --> 01:20:21,880 Speaker 1: well I'm gonna get like a master's in this, Like 1410 01:20:21,920 --> 01:20:25,439 Speaker 1: I'm not gonna get a PhD. Because you know, what 1411 01:20:25,479 --> 01:20:28,920 Speaker 1: I want to do is advise either well funds or 1412 01:20:29,000 --> 01:20:33,080 Speaker 1: investment you know, with bankers on well biotech stuff. So 1413 01:20:33,080 --> 01:20:34,519 Speaker 1: I'm like, well, why do you want to do that? 1414 01:20:35,000 --> 01:20:36,400 Speaker 1: You know, why would you want to be an investment 1415 01:20:36,439 --> 01:20:39,920 Speaker 1: banker for for biotech? Is like, well, like you know, yeah, 1416 01:20:40,040 --> 01:20:41,439 Speaker 1: you can make a lot of money. And I was like, 1417 01:20:41,600 --> 01:20:43,120 Speaker 1: I don't. I mean, that's like, what are you thinking 1418 01:20:43,360 --> 01:20:45,920 Speaker 1: if you're like a nineteen year old and you love 1419 01:20:45,960 --> 01:20:50,479 Speaker 1: science like before, just like just like like like deciding 1420 01:20:50,520 --> 01:20:52,559 Speaker 1: to be an investment banker, Like, well, maybe you should 1421 01:20:52,600 --> 01:20:56,479 Speaker 1: pursue science. So like you got It's like you gotta 1422 01:20:56,520 --> 01:20:58,840 Speaker 1: be in it for the right reasons. I think that. 1423 01:20:58,920 --> 01:21:01,720 Speaker 1: I think that is are you astute and you can 1424 01:21:01,760 --> 01:21:04,479 Speaker 1: hardly go wrong telling people if you follow your passion, 1425 01:21:04,840 --> 01:21:07,240 Speaker 1: it's going to take you to the right place. But 1426 01:21:07,320 --> 01:21:09,840 Speaker 1: if you do this for the money may not work out. 1427 01:21:09,880 --> 01:21:11,680 Speaker 1: So well, yeah, I hope that's true. I don't. I mean, 1428 01:21:11,720 --> 01:21:14,880 Speaker 1: you know, what do we know? I think that's true. 1429 01:21:14,920 --> 01:21:19,280 Speaker 1: And and what you said is fairly consistent with lots 1430 01:21:19,280 --> 01:21:21,800 Speaker 1: of what our guests have said. Is if you if 1431 01:21:21,800 --> 01:21:24,040 Speaker 1: you're just doing something for the money. It's a job, 1432 01:21:24,160 --> 01:21:26,840 Speaker 1: it's a labor. And when you do something because you 1433 01:21:26,960 --> 01:21:29,400 Speaker 1: really are passionate about it, you love it. The money 1434 01:21:29,439 --> 01:21:32,760 Speaker 1: will come eventually and you're you won't be miserable having 1435 01:21:32,760 --> 01:21:35,160 Speaker 1: the money. Being miserable and then making a decision to 1436 01:21:35,200 --> 01:21:38,800 Speaker 1: shift twenty years later is a much bigger challenge than 1437 01:21:38,840 --> 01:21:43,439 Speaker 1: gradually ramping up the cash. And our last question, what 1438 01:21:43,600 --> 01:21:47,600 Speaker 1: is it that you know about value investing, activist investing, 1439 01:21:48,320 --> 01:21:51,960 Speaker 1: UM and others that you wish you knew fifteen years 1440 01:21:51,960 --> 01:21:55,519 Speaker 1: ago when you we're just getting out of school. I 1441 01:21:55,560 --> 01:21:59,559 Speaker 1: think it's probably that same point of like, I think 1442 01:21:59,560 --> 01:22:02,880 Speaker 1: that like that back then, I bought into this idea 1443 01:22:03,000 --> 01:22:04,920 Speaker 1: like of you know, well I'm gonna I'm out with 1444 01:22:05,040 --> 01:22:08,280 Speaker 1: the market, as opposed to like the idea of like 1445 01:22:08,320 --> 01:22:10,679 Speaker 1: I'm gonna, like do a lot of hard work and 1446 01:22:10,760 --> 01:22:14,160 Speaker 1: we'll try not like to make too many dumb mistakes. 1447 01:22:14,200 --> 01:22:17,760 Speaker 1: And I think that, like in investing, it's a lot 1448 01:22:17,800 --> 01:22:21,920 Speaker 1: about just avoiding the disasters. Jeff, thank you so much. 1449 01:22:21,960 --> 01:22:25,240 Speaker 1: This has been terrific. I appreciate you being so generous 1450 01:22:25,600 --> 01:22:29,280 Speaker 1: with your time. If you enjoyed this conversation, be sure 1451 01:22:29,320 --> 01:22:31,920 Speaker 1: and looked up an inch or down an inch on 1452 01:22:32,040 --> 01:22:34,400 Speaker 1: Apple iTunes, and you can see any of the other 1453 01:22:34,920 --> 01:22:39,240 Speaker 1: hundred plus conversations we've had. I would be remiss if 1454 01:22:39,280 --> 01:22:44,280 Speaker 1: I did not think my booker Taylor Riggs, Charlie Volmer, 1455 01:22:44,320 --> 01:22:48,920 Speaker 1: who is I guess technically our producer when he's not 1456 01:22:49,040 --> 01:22:53,680 Speaker 1: busy um blowing up things in his kitchen accidentally, and 1457 01:22:53,800 --> 01:22:58,839 Speaker 1: Michael Batnick, who is our head of research. I'm Barry Ridolts. 1458 01:22:59,040 --> 01:23:04,719 Speaker 1: You've been listening of Master's in Business on Bloomberg RADIOH