Speaker 1: Bloomberg Audio Studios, Podcasts, radio news. This is Masters in
Speaker 1: Business with Barry Ritholts on Bloomberg Radio.
Speaker 2: This week on the podcast strap Yourself In for Another Banger,
Speaker 2: Chris Davis choose up the scenery. He is the portfolio
Speaker 2: manager of Davis Advisors. They've been kicking the smps but
Speaker 2: for the past I don't know, since nineteen sixty nine,
Speaker 2: twenty billion dollars in client assets. Fascinating conversation. Charlie Munger
Speaker 2: was his mentor. He sits on the board of Coke
Speaker 2: and On Berkshire Hathaway. I thought this conversation was spectacular.
Speaker 2: I think you will also with no further ado, my
Speaker 2: sit down with Chris Davis.
Speaker 3: It's so always good to be with you. Thank you
Speaker 3: so much.
Speaker 2: So before we get into your career, master's degree with
Speaker 2: honors from the University of Saint Andrews in Scotland, Like,
Speaker 2: how did that come about?
Speaker 3: Well, and one of the things that confuses people is
Speaker 3: I actually don't have an undergraduate degree. I only have
Speaker 3: the master's degree. Wait, I sort of skipped that.
Speaker 2: Did you did you go to an undergraduate college?
Speaker 3: Well, what happened is I went to Saint Andrews. I
Speaker 3: had originally only intended to go for a year. I
Speaker 3: wanted to be a veterinarian's that's a longside story. And
Speaker 3: I had worked at the Bronx Zoo. I wait, wait, wait,
Speaker 3: Humane Society.
Speaker 2: So the original plan wasn't Dad's a fund manager, grand
Speaker 2: fought pause a grant fund manager. I guess I'm going
Speaker 2: to be a going to the family business. That was
Speaker 2: not the plan.
Speaker 3: Definitely not. But I give both of them credit. They
Speaker 3: you know, they felt that all of their kids should
Speaker 3: be financially literate. And so every kid worked for my
Speaker 3: father or for my grandfather at some point point and
Speaker 3: learned because they just felt like, look, you'll have money
Speaker 3: over time. It's not taught in schools, just the basic
Speaker 3: fundamentals of investing. And if you got help, you turn
Speaker 3: on the TV, you're going to get a totally distorted view.
Speaker 2: Of what invstipos of nonsense exactly.
Speaker 3: And so we all had this grounding. But you know,
Speaker 3: for example, my my smartest sibling without question, as my sister,
Speaker 3: my younger sister. But she's a small town doctor, but
Speaker 3: boy does she understands investing. She's very thoughtful in how
Speaker 3: she's managed her financial affairs. So we owed that route,
Speaker 3: but we all thought we were going different paths. She
Speaker 3: was interested in medicine. I was interested in veterinary medicine,
Speaker 3: and so I was going to go to Cornell. And
Speaker 3: I was very young for my high school class, and
Speaker 3: I was very late hitting puberty. I mean I was
Speaker 3: five feet tall my senior year in high school. That's
Speaker 3: when I broke five feet so you know that you
Speaker 3: can imagine what this looked like. But but my scores
Speaker 3: and grades were okay. And so Cornell took me into
Speaker 3: their prevet program. But the woman that ran it said, look,
Speaker 3: this is a seven year program. It's intense. Why don't
Speaker 3: you take a year off, like a gap year. So
Speaker 3: I propose that to my father. He said, we don't
Speaker 3: do that in our family. Like you could go study,
Speaker 3: but there's no like year off like to go ski year.
Speaker 3: Find this.
Speaker 2: Did you skip a grade or you?
Speaker 1: Like me?
Speaker 2: The back of like October November December, So you're young
Speaker 2: relative to no.
Speaker 3: I had skipped a grade sort of early because I bazarrely.
Speaker 3: I didn't nobody in my family believes this now, but
Speaker 3: I didn't talk until quite late. So they had sort
Speaker 3: of and.
Speaker 4: Then when I started talking, they jumped to me out
Speaker 4: and it never stopped since then.
Speaker 3: But anyway, so I had this year period and it
Speaker 3: was the first year that the University of Saint Andrews
Speaker 3: wast in taking direct applications from students that where they
Speaker 3: dropped the requirement to have A levels or O levels
Speaker 3: to sort of British entry exams, mostly because they wanted
Speaker 3: the Yankee dollar. You've got to remember Thatcher had just
Speaker 3: become Prime Minister. She was slashing the public support of
Speaker 3: the Scottish universities. So I applied. There were I think
Speaker 3: eight of US Americans that came in that first year,
Speaker 3: and they had a program where after two years you
Speaker 3: could apply into the honors program, which would allow you
Speaker 3: to concentrate on just one subject, and I ended up
Speaker 3: picking two, but needless, it was philosophy and theology and interesting,
Speaker 3: you know. I picked them my freshman year, thinking well,
Speaker 3: when I go back to Cornell, I'm going to be
Speaker 3: filled up with organic chemistry and biology and anatomy and
Speaker 3: so on, so I may as well pick things that
Speaker 3: I would never I'll never get to study again. So
Speaker 3: I picked things like medieval history, philosophy, theology.
Speaker 2: I love that. That's something I always, in hindsight wish
Speaker 2: I did. And I started out physics and math and
Speaker 2: switched the political science and philosophy. So I got to
Speaker 2: study some stuff that was fun. But like medieval history,
Speaker 2: sounds like that would be a delightful semester.
Speaker 3: You use the perfect word fun. I mean I became
Speaker 3: a good student in high school. I wasn't a good student.
Speaker 3: In fact, recently I found my elementary school my eighth
Speaker 3: grade final report card. I went to a school here
Speaker 3: in New York and it was a pretty strict, you
Speaker 3: know where, a uniform sort of boys' school, and the
Speaker 3: headmaster would review each report card before it went to
Speaker 3: the parents and then make a comment on the bottom.
Speaker 3: And the headmaster's comment on my final elementary school report
Speaker 3: card was yet another semester of squandered potential.
Speaker 2: Not living up to his potential. God, my children classic.
Speaker 4: My children found that my mother David to my children,
Speaker 4: which was a big problem you could imagine.
Speaker 3: But anyway, so I thought I'll just be in Scotland
Speaker 3: for a year. I picked subjects I would never study again.
Speaker 3: They were so fun.
Speaker 2: It was just it was especially in Scotland.
Speaker 3: Medieval in a medieval university and where Hume had been
Speaker 3: a professor. I mean, you know, it was just amazing,
Speaker 3: And of course it was. It's also a Presbyterian seminary,
Speaker 3: so so Saint Mary's, which is one of the colleges there.
Speaker 3: So I thought, well, you know, and I'm not. It
Speaker 3: wasn't that I was a deeply faithful sort of person.
Speaker 3: I more thought of theology from the point of view
Speaker 3: of you know, people organize their lives around religion, people
Speaker 3: die for it, people, you know, I should study this.
Speaker 3: And but I also there was a secondary reason that
Speaker 3: I was interested, which is, if you look at communities
Speaker 3: that have a religious institution at their center, whether they're rural,
Speaker 3: whether the urban suburban, almost all outcomes are better, you know,
Speaker 3: intact families, crime rates, graduation rates, you know, all of
Speaker 3: these sorts of statistics tend to go better. So to me,
Speaker 3: there's I was lucky that I didn't. I was never
Speaker 3: you know, didn't have one of those childhoods where it
Speaker 3: was beaten into me or something. So it was more
Speaker 3: this curiosity about how it seemed to serve communities to
Speaker 3: have a shared value system. Anyway, I picked those subjects
Speaker 3: I applied into this honors program, so I was able
Speaker 3: to get the Masters at the end, but there was
Speaker 3: no undergraduate degree along the way.
Speaker 2: And there was no going back to Cornell to become
Speaker 2: a vet now, although the order for that faded.
Speaker 3: Although because I deferred my admission freshman year, I still
Speaker 3: get mailings from their alumni department because I matriculated but
Speaker 3: then deferred, And I'd like to think the Development department
Speaker 3: has nothing to do with them sending me these mailings.
Speaker 3: But I lived on a sheep farm in Scotland, and
Speaker 3: of course that was when I realized I was confusing
Speaker 3: loving animals with wanting to be a vet, and those
Speaker 3: are very different things.
Speaker 2: Yeah, very much.
Speaker 3: So.
Speaker 2: I'm always as we used to foster dogs and get
Speaker 2: them adopted, and anytime I meet someone who was like, oh,
Speaker 2: I really don't care for dogs, it's like.
Speaker 3: Oh, that's a big ex don We weren't allowed to
Speaker 3: have dogs when I was a kid, But I grew
Speaker 3: up right in the city of East eighty fourth Street.
Speaker 3: But my parents from the time I was in maybe
Speaker 3: third grade or so, so what would that be, probably
Speaker 3: nine years old or eight years old something like that,
Speaker 3: they said I could walk dog, I could be a
Speaker 3: dog walker, provided I didn't cross any street, so you know,
Speaker 3: i'd put up a notice in the elevator and their
Speaker 3: building if anybody needed their dog walk, and then I
Speaker 3: would just walk the dogs around the block before school
Speaker 3: and after school. I can still remember the name of
Speaker 3: every dog I walked, which is amazing. And I loved it.
Speaker 3: And of course it actually became seed capital, which is unexpected.
Speaker 3: But the reason was, you know, I could probably charge
Speaker 3: fifty cents a walk back then, so it was nothing,
Speaker 3: but I got to be with dogs and I enjoyed it.
Speaker 3: It was like a.
Speaker 2: Paper running a small business. I had a paper route
Speaker 2: and it was just so formative so far.
Speaker 3: And this was like a paper route for city kids
Speaker 3: because you didn't couldn't have a paper route New York.
Speaker 3: But then an amazing thing happened New York City around
Speaker 3: nineteen I'd have to be around nineteen seventy seven or
Speaker 3: seventy eight passed the Pooper Scooper line, I remember, and
Speaker 3: everything changed because people had these dogs with nobody even
Speaker 3: knew what to do they nobody had ever imagined cleaning
Speaker 3: up after a dog. There are all sorts of inventions,
Speaker 3: you know, talls, but people didn't you know people were
Speaker 3: so gross they had to carry shovels with them.
Speaker 2: Change the diaper on the baby. How it's just processed food.
Speaker 2: There's no big deal.
Speaker 3: Well for me that my rates could go from fifty
Speaker 3: cents to five dollars and people were glad to pay it.
Speaker 3: And instead of one or two dogs, I had four
Speaker 3: or five. And it was real money because what it
Speaker 3: meant was I was suddenly making you know, fifty dollars
Speaker 3: a week.
Speaker 2: In nine sixty.
Speaker 3: Dollars a week.
Speaker 2: Yeah, that's good.
Speaker 3: Yeah, And so you start, you know, thinking about holy cow,
Speaker 3: you know, I'm making two hundred and fifty dollars a month.
Speaker 3: You know, I'm making thousands of dollars a year. And
Speaker 3: it was just fantastic. So I've I've loved dogs ever since.
Speaker 2: So let's talk a little bit about the early days
Speaker 2: of the career. You start as an accountant at State
Speaker 2: Street Bank and ultimately end up as a unglamorous research
Speaker 2: analyst at Tanaka Capital Management. These are, you know, very
Speaker 2: much bottom rung on the Oh Street ladders. What you
Speaker 2: learn in those well, it.
Speaker 3: Wasn't really my first job. My first job was I
Speaker 3: became a pastoral ass at the American Cathedral in Paris,
Speaker 3: so I lived. I moved from rural Scotland to Paris. Well,
Speaker 3: that was like landing in oz you know, you get
Speaker 3: honest to God, you my eyes lit up, but again
Speaker 3: in the same way that living on the sheep farm
Speaker 3: convinced me I was confusing loving animals with wanting to
Speaker 3: be a vet, you know. Working for the American Cathedral
Speaker 3: convinced me I was confusing loving people with wanting to
Speaker 3: you know, be a priest or something. So I moved
Speaker 3: from there to Boston, and I thought about teaching. I
Speaker 3: actually even applied to the CIA because I was very
Speaker 3: interested in research and international affairs. I'd lived abroad then
Speaker 3: five years, and I thought it would be an amazing
Speaker 3: thing to be the greatest expert on let's say Czechoslovakia's
Speaker 3: learned the language, the history, the people, the economics, the business,
Speaker 3: the military, the topography. And so I didn't want to
Speaker 3: be a spy, but I wanted to be an analyst.
Speaker 3: And CIA wisely turned me down, having briefly had a
Speaker 3: stint in you know, sort of the Worker's Revolutionary Party,
Speaker 3: you know, and.
Speaker 2: Oh so they looked at your history and said, this guy's.
Speaker 3: Yeah, they're like, this needs to ripe it a little more.
Speaker 2: We don't know have ethical malleability that we're looking for.
Speaker 3: But I and so, you know, I started thinking about
Speaker 3: the summers that I had spent working with my dad
Speaker 3: and my grandfather, both of whom loved their jobs. They
Speaker 3: loved investing, they loved their career, and of course that
Speaker 3: was infectious even as kids. I thought the idea of
Speaker 3: investing was so interesting because they didn't highlight the math
Speaker 3: to begin with. They highlighted the stories, the people, the ideas.
Speaker 3: And but I realized that even though I've had this
Speaker 3: study of sort of the idea of businesses being made
Speaker 3: up of people and ideas and this sort of interest
Speaker 3: in that, I had no grounding in the rigor of it.
Speaker 3: And so what I like to say is, you know,
Speaker 3: my father and grandfather, you know, let us live in
Speaker 3: a foreign country, like live in France for some time
Speaker 3: and hear French spoken and see this new culture. But
Speaker 3: we did that before. We had to learn the grammar
Speaker 3: and read the textbooks and so on. So they got
Speaker 3: the order right for setting the hook of curiosity. But
Speaker 3: I knew enough to know that I couldn't go into
Speaker 3: investing without a real grounding, and of course a bank
Speaker 3: is perfect. And I got I mean I interviewed a
Speaker 3: lot of places. George Putnam himself turned me down for
Speaker 3: a job at Putnam. So I had a lot of
Speaker 3: rejects before. And State Street Bank had an program for
Speaker 3: entry level accountants, and you know, they had a wonderful
Speaker 3: training program. And so I had an operations center in Quincy, Massachusetts,
Speaker 3: and I would take the red line down there and
Speaker 3: and I could do my day job. But they would
Speaker 3: also pay for all of any schooling you wanted. They
Speaker 3: had something called the State Street Institute, and you could
Speaker 3: take courses and anything to do with economics, accounting, business,
Speaker 3: and so I took advantage of that, although I will
Speaker 3: say I was fooled by one course. They had a
Speaker 3: course in their catalog that was called the Rules of
Speaker 3: Rhythmic Touch.
Speaker 2: Now I thought that sounds like massage.
Speaker 4: That sounds pretty good, right, I figure I circled that
Speaker 4: one in a little course catalog.
Speaker 3: It was only a two night's course, and I showed
Speaker 3: up and it was how to use a ten punch
Speaker 3: tape calculator, you know, without looking at your hands, so
Speaker 3: you know when you're summing up the column is the
Speaker 3: rules of rhythmic touch. And I would say, if you
Speaker 3: put what on this table now, I would be calf
Speaker 3: I would bet you a large sum of money. I
Speaker 3: could run a column of numbers faster than you.
Speaker 2: I'm going to that one.
Speaker 3: But so that's so I got the grounding there. Graham
Speaker 3: Tanaka was somebody I had met during my summer jobs.
Speaker 3: He was a very talented analyst at Fiduciary Trust. He'd
Speaker 3: been at JP Morgan before, and uh, we'd sort of
Speaker 3: stayed in touch, and I learned that he was hanging
Speaker 3: out his own shingle and starting his own firm. And
Speaker 3: he's a Japanese American really a very you know, driven,
Speaker 3: talented guy. And uh he said he wanted an apprentice,
Speaker 3: and uh, and you know it would be everything. I
Speaker 3: would be his first hire and we would go from there.
Speaker 3: And that was a terrific hell did I stayed there
Speaker 3: about two years. Uh, And we stayed because what happened
Speaker 3: after the first stretch is my grandfather, who I was
Speaker 3: close with when I went to work for Tanaka. My
Speaker 3: grandfather opened up an account at Tanaka because he thought
Speaker 3: this was you know, he had big investments in Japanese firms.
Speaker 3: He had a lot of admiration for Japanese culture values, and.
Speaker 2: He admired late seventies, early eighties.
Speaker 3: This was late eighties now, so we're probably in eighty nine,
Speaker 3: something like eighty eight eighty. Yeah. Well, but Graham was
Speaker 3: a growth investor primarily in the US, and so he
Speaker 3: just happened to have Japanese heritage. But so my grandfather
Speaker 3: opened account and as the time there progressed, my grandfather
Speaker 3: was worried about his health failing. He loved the business
Speaker 3: and he wanted to die at his desk, and so
Speaker 3: he started asking if I would come in on the
Speaker 3: weekends and go through his you know, his accounts with him.
Speaker 3: And Graham, of course, was so respectful of that, and
Speaker 3: so it was sort of a very gradual transition out.
Speaker 3: There wasn't an end date of my time with Graham
Speaker 3: so much as there was a start date of my
Speaker 3: time working with my dad and father.
Speaker 2: So your father launched Davis Advisors in nineteen sixty nine, yea,
Speaker 2: and your grandfather was still running his Davis investing shop. Yeah, parallel.
Speaker 2: Did they ever end up murging what happens when they
Speaker 2: decided all right, it's you know, it's time.
Speaker 3: Well, my father was my grandfather's only son, and as
Speaker 3: often happens, they had a very complicated relationship, and so
Speaker 3: they never worked together. My father grew up with his
Speaker 3: famous name because your numbers were right. In the beginning.
Speaker 3: It was one hundred thousand dollars that he borrowed from
Speaker 3: his wife's family. It was eight hundred million when he died,
Speaker 3: and it was two point two billion when his wife died,
Speaker 3: and she was sort of the successor trustee, and then
Speaker 3: it all went to charity after that. He didn't believe
Speaker 3: in inheritance, but it was in trust for her and
Speaker 3: she lived to be one hundred and six.
Speaker 2: Wow.
Speaker 3: Although I will tell you I managed her account, and
Speaker 3: you know, in two thousand and eight, of course I
Speaker 3: had to go see her and we had a lot
Speaker 3: of financial stocks and we had a really bad mark
Speaker 3: at the bottom, probably down forty or fifty percent. And
Speaker 3: I went to see her in Florida and I said,
Speaker 3: you know, grand I just I want you to know
Speaker 3: the businesses are sound. You know, we took some body blows,
Speaker 3: but you know, in the long run, it's going to
Speaker 3: be fine. She said, you idiot, I'm ninety eight years old.
Speaker 4: She said, I don't buy green bananas, and you're you're
Speaker 4: telling me I'm down fifty percent and you go.
Speaker 3: Get back to work. So she teached me because of
Speaker 3: course she lived long enough to see it all come back.
Speaker 3: But we would always she would always tease me about
Speaker 3: not buying green bananas, and my telling her she just
Speaker 3: had to have a little bit of a longer term perspective.
Speaker 3: But anyway, so my my my grandfather built his firm
Speaker 3: which was called Shelby Colin Davis and Company. My father
Speaker 3: built his which in the beginning was called Davis, Palmer
Speaker 3: and Biggs and Uh. And then the New York Venture
Speaker 3: Fund was a client or a fund managed by Davis,
Speaker 3: Palmer and Biggs. And And when I was working at Tanaka,
Speaker 3: I went to a meeting. It was Chub Insurance, you know,
Speaker 3: analyst day sort of thing. And there weren't that many
Speaker 3: analysts then, so it was held around a big sort
Speaker 3: of boardroom table, and the CEO is Dino Hare, and
Speaker 3: he'd sit there and say, we Chubb you know this
Speaker 3: he was it was and uh, And I looked around
Speaker 3: the table and both my father and grandfather were at
Speaker 3: the same meeting by chance, and uh and I thought
Speaker 3: this seems a little nuts and uh uh. And so
Speaker 3: you know, I spoke to them both because I was
Speaker 3: very close with them both. And you know, one of
Speaker 3: of the things my father was very clear on is
Speaker 3: he wanted out at age sixty. He said, I'm not
Speaker 3: yep our age. Yeah, hard stop. And here was my
Speaker 3: grandfather at the time, and he was probably in his
Speaker 3: late eighties and early eighties probably then, and he said,
Speaker 3: you know, I want to die at my desk. I mean,
Speaker 3: he was the one that called investing the best game
Speaker 3: in town. He would say, this is the best game
Speaker 3: in town. He loved his firm. He loved now his firm,
Speaker 3: well most of it was his own capital, and so
Speaker 3: in a way he was just managing his own but
Speaker 3: he loved being in the flow. He loved in a way,
Speaker 3: my grandfather loved being a great man. You know. He
Speaker 3: had served as an ambassador, He was a co founder
Speaker 3: of the Heritage Foundation chairman for a long time. He
Speaker 3: had very conservative political views, although that was slightly different
Speaker 3: organization twenty five years ago than it is now. But
Speaker 3: he was a passionate Reagan Republican and sort of a
Speaker 3: Hoover Institute sort of Republican, and his namesake, Shelby Cullum, was,
Speaker 3: you know, a Republican senator and governor under Lincoln. So
Speaker 3: I mean, you know, it was it was in him deep.
Speaker 3: And so he loved the game, and it wouldn't have
Speaker 3: occurred to him to stop working. My father loved investing,
Speaker 3: but he did not like the responsibility of the business.
Speaker 3: He didn't like boards and clients and you know, employees.
Speaker 3: That was not his thing. Is much more a wonderful
Speaker 3: human being, but very different than my grandfather. So he
Speaker 3: wanted out before he turned sixty. My grandfather wanted to
Speaker 3: die at his desk. And I thought, well, here I am.
Speaker 3: I don't know what I am at the time, twenty
Speaker 3: six or something. I was like, well, here's a great idea.
Speaker 3: Why don't we merge the companies and then I'll come
Speaker 3: in and you know, I'll learn from both of you.
Speaker 3: And I was an SNL and a banking analyst then,
Speaker 3: and of course this was going right into the teeth
Speaker 3: of the SNL crisis, so it was an exciting time
Speaker 3: to invest. And then you know, we'll figure out a
Speaker 3: way for the three of us to do.
Speaker 2: It, and how long did it take for that to
Speaker 2: all come together?
Speaker 3: I think my grandfather my father turned sixty in nineteen
Speaker 3: ninety seven, nineteen ninety eight, somewhere like that. And my
Speaker 3: grandfather died six.
Speaker 2: Eighty six something like that, you.
Speaker 3: Know, don't quiz me. And then my grandfather died in
Speaker 3: let's see, nineteen ninety four, so I have to say
Speaker 3: he was eighty six or eighty seven when he died,
Speaker 3: and so in a way, the timing all sort of
Speaker 3: overlapped beautifully. And so my grandfather worked almost to the end.
Speaker 3: My father helped coach me through that transition, and then
Speaker 3: he walked out the door in nineteen ninety eight, and
Speaker 3: that was that. And wow, he's been an incredible mentor.
Speaker 3: He's always available to talk, but as he said, I'm
Speaker 3: here to give you advice, I'm not giving any orders.
Speaker 3: And he didn't sit on our boards, and you know,
Speaker 3: he just walked out, and just like my grandfather, started
Speaker 3: giving his money away. And he's you know, he created
Speaker 3: and oversees the largest international scholarship program on earth.
Speaker 2: Really, yeah, I know there's a foundation. I haven't read
Speaker 2: the book, but online there's John Rothchild, who was I
Speaker 2: think Peter Lynch's Yeah, author lovely man, the Davis Dynasty.
Speaker 2: How odd is it to have, like, hey, you know
Speaker 2: this story, the game isn't over and you're you're writing
Speaker 2: this book. How odd is it to be art of
Speaker 2: a book like that?
Speaker 3: Well, you know, first, it's probably a book read by
Speaker 3: dozens of people nationwide because remember it is the riveting
Speaker 3: biography of the dean of insurance stocks. So it's not
Speaker 3: you know, that's a pretty narrow.
Speaker 2: Narrow pool, not a hot seller yourself.
Speaker 3: And I do think I experienced the writing of that
Speaker 3: book as you know, sort of terrifying, you know, really, yeah,
Speaker 3: because it was a lot to live up to. Well,
Speaker 3: it's a lot to live up to. And I will
Speaker 3: say it's it's something that I'm just profoundly grateful to
Speaker 3: my dad, well really to both of them. But my
Speaker 3: dad was is a very humble person. And you know,
Speaker 3: when you in that book, it is, you know, ninety
Speaker 3: percent about my grandfather. And my dad was, you know,
Speaker 3: sort of what I call a quiet doer. He loved investing,
Speaker 3: he loved research, but he was very low profile and
Speaker 3: so his view was very much that despite the sort
Speaker 3: of graphic title, this is really a book about his father,
Speaker 3: and I think that that's true. And in fact, when
Speaker 3: we at our firm, we made slim down versions of
Speaker 3: that book and called it the Davis Discipline instead, which
Speaker 3: was much more consistent with our sort of view of life,
Speaker 3: because you know, dynasty implies sort of dynastic wealth, it
Speaker 3: implies inherent and there's no inherent and there was that
Speaker 3: was none of that, which, as.
Speaker 2: I would imagine, people would be surprised to learn.
Speaker 3: Yeah, and it's funny, it's it's not something I'm quite
Speaker 3: as fanatic about.
Speaker 2: Well, Warren Buffett is a big believer in, hey, if
Speaker 2: you give your kids, you should give your kids enough.
Speaker 2: I know, I'm going to mangle this. Give them enough
Speaker 2: money so they could do anything, but not so much
Speaker 2: money that they can do nothing.
Speaker 3: You didn't mangle it. You stuck the landing. That's exactly,
Speaker 3: and that is exactly the right floss. And I would say,
Speaker 3: you know, my father, my grandfather sort of believed that.
Speaker 3: I mean, I have siblings that you know where you
Speaker 3: know they were helped out, and you know I had
Speaker 3: an aunt. You know that that my my grandfather left
Speaker 3: some money to to ensure that she and her kids
Speaker 3: would be all right and so on. So it wasn't ruthless,
Speaker 3: and I think, but I think there was. It came
Speaker 3: from a place of sort of compassion. I mean the
Speaker 3: sort of view that you know, there's something dignified about
Speaker 3: burning your way in the world, and and I think
Speaker 3: there's you know, the idea of wanting well, look, Barry,
Speaker 3: let's I mean, if you look at the greater world,
Speaker 3: there's a lot of fear. And fear can be a motivator,
Speaker 3: but God, is it a weight to you know, people live,
Speaker 3: you know, one operation away from bankruptcy or you know,
Speaker 3: a layoff away from being foreclosed on. That is it.
Speaker 3: I mean, if you as a parent can put a
Speaker 3: safety net if our society doesn't, if you as a
Speaker 3: parent can do that for your kids. And my grandfather
Speaker 3: did that, and my father did that, there was I
Speaker 3: don't think we ever grew up with a feeling that
Speaker 3: there wasn't a safety net. And so the freedom from
Speaker 3: that fear is a huge gift you give your kids.
Speaker 3: It was a huge gift that was given to me.
Speaker 3: And that's what gives you the confidence to be able
Speaker 3: to try anything right because you're not worried that you know,
Speaker 3: especially when you start having kids, and you think, my god,
Speaker 3: if you know, I can't I can't take this risk.
Speaker 3: I can't leave State Street. You know. It's it's like
Speaker 3: it never occurred to me that I couldn't leave and
Speaker 3: and and so I but I think their view was,
Speaker 3: you know, if you raise your kids with you know.
Speaker 3: The fortunate thing was both my dad and my grandfather
Speaker 3: were very frugal, and so we didn't live in hardship.
Speaker 3: But we certainly didn't go to Southampton and Palm Beach
Speaker 3: and Aspen and you know that was all uh, you know,
Speaker 3: they had a very sort of puritanical sense of that
Speaker 3: that you know, that sort of view that uh, you know,
Speaker 3: we went out to Fire Island and we had a
Speaker 3: house on stilts that I still have a house out there,
Speaker 3: you know, and it's in a swamp and and uh,
Speaker 3: you know, it's one storm away from the end, and
Speaker 3: there's no cars. You take a little aerry out there,
Speaker 3: and and you know, I always think of it as
Speaker 3: the anti Hampton's uh very much. Yeah, and so and
Speaker 3: that's that's what what I love. And and uh, and
Speaker 3: you know, my parents had a place in Maine, but
Speaker 3: it was just you know, it was no not a
Speaker 3: fanily deal. Yeah, they had a nice house, but it
Speaker 3: wasn't it wasn't a Newport mansion. And they had it because,
Speaker 3: you know, they used to call them in the twenties,
Speaker 3: people like my grandparents were called rusty caters. Isn't that
Speaker 3: a funny word? And it was people that were wealthy
Speaker 3: but would go and live very simply in the summer,
Speaker 3: you know, very and that it's very much just sort
Speaker 3: of a Scandinavian ethic, and I think it developed especially
Speaker 3: in the late nineteenth century. There was a movement called
Speaker 3: the Chautauqua Movement that I'm still a supporter of, which
Speaker 3: basically said, as the bourgeoisie and wealth was being created,
Speaker 3: there was this one branch of wealth creators that decided
Speaker 3: they wanted to be English aristocrats and they built mansions
Speaker 3: in Newport and they had yachts. And then there was
Speaker 3: another branch that sort of said that's not the American
Speaker 3: way and they and in many ways, I mean Rockefeller
Speaker 3: in many ways embodied a certain amount of that, that
Speaker 3: sense of stewardship some or even more extreme in terms
Speaker 3: of restraint. But the Chautauqua movement sprung up and said
Speaker 3: they created these there's still one left. It's in upstate
Speaker 3: New York. But where you would go with your family
Speaker 3: for self improvement and you would live simply and there
Speaker 3: would be lectures, there would be you would improve your mind,
Speaker 3: you'd improve your soul, and you'd improve your health, and
Speaker 3: you'd bring your kids and there would be sort of
Speaker 3: daycamp for the kids, and there'd be church on Sunday.
Speaker 3: But it was a non denominational church that was about service,
Speaker 3: and then there was you know, there were lectures. It's
Speaker 3: where Solomon Rushdie was stabbed. If you remember a couple
Speaker 3: of years ago, he was in Chautauqua. He was lecturing
Speaker 3: at this place that still exists. People go for a
Speaker 3: week or two weeks every year. So that's what the
Speaker 3: place I go on Fire Island was part of that
Speaker 3: Chautauqua movement. But the ethos of it, I think is
Speaker 3: something my parents and grandparents really subscribed to.
Speaker 2: Huh, really really fascinating. Coming up, we continue our conversation
Speaker 2: with Chris Davis, chairman and portfolio manager at Davis Advisors,
Speaker 2: discussing how he developed his philosophy and investment process at Davis.
Speaker 2: I'm Barry Ridults, you're listening to Masters in Business on
Speaker 2: Bloomberg Radio. I'm Barry Ridults. You're listening to Masters in
Speaker 2: Business on Bloomberg Radio. Chris Davis is my extra special guest.
Speaker 2: He is the chairman of Davis Advisors. In two thousand
Speaker 2: and five, he was named Morning Stars Portfolio Manager of
Speaker 2: the Year. He helps to oversee twenty billion dollars in
Speaker 2: client assets, a healthy chunk of which is he and
Speaker 2: his colleagues. We briefly mentioned Buffett earlier when I later on,
Speaker 2: I get to ask people who they're meant were. But
Speaker 2: I have to bring this to this part of the conversation.
Speaker 2: Warren Buffett and Charlie Munger were your mentors. Is this
Speaker 2: remotely true? It just seems insane. Oh.
Speaker 3: I mean it started and I want to say it
Speaker 3: was nineteen might have been nineteen ninety ninety.
Speaker 2: So he's already a well known investing rock star at
Speaker 2: that point.
Speaker 3: Well, the way it really started was with Charlie. I
Speaker 3: met Charlie long before Warren. Oh really. But the reason
Speaker 3: was I was trying to sell a business my grandfather.
Speaker 3: As I started going through his accounts and going in
Speaker 3: there on the weekends. He had a business called securities lending.
Speaker 3: And I don't know how well you know that your business.
Speaker 2: And anytime you're in a short stock, you gotta need
Speaker 2: to borrow somebody, and it's going to cost you a little.
Speaker 3: It's going to cost you a little margin. So my
Speaker 3: grandfather's view was he had a portfolio of appreciated stocks
Speaker 3: that he was never going to sell, and he said,
Speaker 3: if somebody wants to short the stock and pay me
Speaker 3: to borrow it, fine, And you the number one borrowed
Speaker 3: stock in those days was Birkshaw, of course, because you
Speaker 3: couldn't borrow it anywhere because everybody had the certificates and
Speaker 3: you know they weren't literally, yeah, there was no There
Speaker 3: was very little Berkshire that was in street name. It
Speaker 3: was in individual pew and therefore you couldn't borrow it.
Speaker 2: It was locked away in safe.
Speaker 3: Yeah. So he had a big holding and he had
Speaker 3: a broker dealer, Shelby cam Davis was a registered broker dealer,
Speaker 3: and so he could lead down the shares and make
Speaker 3: a couple hundred basis points a year extra return on
Speaker 3: top of the Berkshire return. So that's how he started
Speaker 3: in the securities lending business. But gradually the guy who
Speaker 3: was doing it for him and administering it. Said well,
Speaker 3: you know, we could also help. We've got all these
Speaker 3: people that want to short all sorts of different securities,
Speaker 3: and we can be act as what was called a
Speaker 3: broker finder. We'll go out and find the securities for
Speaker 3: these people to short, and we'll make a little a
Speaker 3: little spread as they go through. Well, this business grew
Speaker 3: and grew and grew, and soon there were you know,
Speaker 3: seventeen employees in this securities lending business, and it was
Speaker 3: a big operation. And my grandfather by then was you know,
Speaker 3: probably in his eighties, and was nervous because, you know,
Speaker 3: as I went through the list of counterparties with him,
Speaker 3: there were firms we had never heard of. There was
Speaker 3: this one called l TCM, and he and I said,
Speaker 3: what is this LTCM. We've got like, you know, five
Speaker 3: eight hundred million dollars lent out to them. What oh,
Speaker 3: that's long term capital management. So we talked about it.
Speaker 3: He said, yeah, I think we've got we got to
Speaker 3: get it. We got to get rid of this thing.
Speaker 3: That reminds me by the way of what Jerry side.
Speaker 2: Wait, did he hold on to that business? So did they?
Speaker 3: So I said to him, like you know, we got
Speaker 3: to get rid of this thing. And he said, fine, well,
Speaker 3: see if you can find somebody to take it over,
Speaker 3: because we do have seventeen employees and you know, they
Speaker 3: made their careers here. We're not going to fire everybody.
Speaker 3: And so we started calling around and I thought, what
Speaker 3: characteristics do we need. We need a lot of excess capital,
Speaker 3: I help. Ideally an appreciated portfolio of securities, you know,
Speaker 3: sort of a triple A type balance sheet, and somebody
Speaker 3: that can understand. So I thought, well, Berkshire. So a
Speaker 3: wonderful friend in those days named Bob Lensner, who was
Speaker 3: a reporter at Forbes but was very I recall I had.
Speaker 2: Lunch with him at I want to say, the Harvard Club.
Speaker 2: I think he was an alumnus.
Speaker 3: They could have been his kids, our kids were. Our
Speaker 3: kids were in the same elementary school. And I got
Speaker 3: to know him just, you know, watching basketball game but
Speaker 3: third graders or something, and he was and I have
Speaker 3: you know, I heard his name around and he said
Speaker 3: he mentioned casually in the conversation that he had met
Speaker 3: this brilliant guy, Charlie Munger. And I said, well, I
Speaker 3: you know, I know Charlie is but I'm dying to
Speaker 3: meet him, and so Bob arranged for us to have breakfast,
Speaker 3: and Charlie was in New York and I went down.
Speaker 3: It was at the Millennium Hotel down by the World
Speaker 3: Trade Center, and I went down and I sat down
Speaker 3: and introduced mister Munger. Pleased to meet you. I'm Chris David,
Speaker 3: and I said, you know, I'm working with my grandfather.
Speaker 3: Shall we call him David's a company? And have I
Speaker 3: got a business for you? And I pitched our securities
Speaker 3: lending business, and Charlie put up his hand after about
Speaker 3: four minutes and he said, I have no intention of
Speaker 3: buying a business run by seven guys named Vinnie.
Speaker 2: And Verry.
Speaker 3: It was the perfect description. I mean, we had Vinnie, Tony, Mikey, Nikki,
Speaker 3: you know. And so we did end up finding finding
Speaker 3: a buyer eventually. Yeah, And it wasn't really a buyer.
Speaker 3: We just did sort of an earn out. We just
Speaker 3: wanted everybody. We just wanted them to have jobs. And
Speaker 3: so they all got a job at a broker dealer.
Speaker 2: And so beyond the pitch to monger how to do
Speaker 2: your relationships well?
Speaker 3: So the pitch ended in four and a half minutes,
Speaker 3: and so I said, well, I'm sorry I wasted your time.
Speaker 3: And I got up to leave, and he said, where
Speaker 3: are you going? And I said, well, I just don't leave.
Speaker 3: I'm only just getting to know you. I'm not interested
Speaker 3: in your business. But tell me about you and tell
Speaker 3: me and we got talking about, you know, a few things.
Speaker 3: But what really happened was I started listening. And so
Speaker 3: you can tell I like to talk around Charlie. I
Speaker 3: just listened as much as I could, and we sat
Speaker 3: at that table till lunchtime. Charlie said, I have to
Speaker 3: go to a lunch but if you find yourself in
Speaker 3: Los Angeles, give me a call and I'll make time
Speaker 3: for you. And so of course I started going to
Speaker 3: Los Angeles pretty regularly. And so that was a huge
Speaker 3: gift in my life. And it was a gift professionally,
Speaker 3: but my god, it was a gift personally. I mean,
Speaker 3: he helped me through some hard times in my personal life.
Speaker 3: I mean he was just a wonderful mentor in every dimension.
Speaker 2: So there is a lot of things that all of
Speaker 2: us have learned from Warren and Charlie, through the letters,
Speaker 2: through the annual meetings, through just all sorts of stuff.
Speaker 2: I'm curious, what did you learn from Charlie that none
Speaker 2: of us can find in the public materials. Well, good question.
Speaker 3: I think most deeply, I learned about integrity in the
Speaker 3: traditional sense, meaning wholeness. Charlie was a whole person. He
Speaker 3: the alignment. What he thought, what he said, what he did,
Speaker 3: they were all the same thing. And his sense of
Speaker 3: his own code of being was so disciplined, but was
Speaker 3: filled with this sort of you know, his reputation as
Speaker 3: a curmudgeon may have been cultivated, I never saw it.
Speaker 3: He was a truth speaker, but he was also, in
Speaker 3: a very profound way, a very loving person, a very cheerful,
Speaker 3: very committed, profoundly loyal, and so it was, you know.
Speaker 3: I used to sort of joke that if I did
Speaker 3: a ven diagram of the things that I admire about
Speaker 3: my father and the things I admire about Charlie Munger,
Speaker 3: there's surprisingly little overlap. They were both frugal, but my
Speaker 3: Charlie didn't was an incredibly broad thinker. My father was
Speaker 3: just single minded about investing. Charlie was curious in everything.
Speaker 3: Charlie was very sort of committed to relationship, continuity, to breadth.
Speaker 3: My father is very sort of specialized. Very Now, my
Speaker 3: father is incredibly physically fit and remains to this day
Speaker 3: very vigorous. You know, Charlie was willfully sedentary. You know,
Speaker 3: my father is very nomadic. And Charlie went to the
Speaker 3: same island in Minnesota and the same lived in the
Speaker 3: same house his whole life. You know, it's very you know,
Speaker 3: very much a creature of habit and so they were
Speaker 3: very different that way.
Speaker 2: Just imagine if Charlie exercised, how much longer he could
Speaker 2: have left.
Speaker 3: I don't know. Ninety nine and three quoters is pretty good.
Speaker 3: That's one of the things he said. He said, I'm
Speaker 3: not sure I see the alignment.
Speaker 2: So let's talk a little bit about the returns and
Speaker 2: about the philosophy. Back of the envelope. I calculated Davis
Speaker 2: Advisors has been compounding shareholder wealth at greater than ten
Speaker 2: percent annually since nineteen sixty nine. Does that sound remotely?
Speaker 3: That sounds right. You're still ahead of the market from
Speaker 3: the beginnings.
Speaker 2: Starting out in nineteen sixty nine, so you're, you know,
Speaker 2: early days of a horrific bear market. You have managed
Speaker 2: money through well, you're in grad school. But your dad
Speaker 2: during the eighty seven crash, you're involved during the dot
Speaker 2: com implosion, during the financial crisis, during the pandemic. I mean,
Speaker 2: you have seen lots and lots of cycles across all
Speaker 2: of these decades and all of these different environments. What
Speaker 2: key investment principles stand out as absolutely core, non negotiable.
Speaker 2: This is the heart of what we do well.
Speaker 3: The entire investment and process boils down to these two questions,
Speaker 3: what sort of businesses do we want to own? And
Speaker 3: how much do we pay for them? And you know
Speaker 3: the types of business characteristics that we focus But in
Speaker 3: the interplace, I should say before I go on that
Speaker 3: the interplay between those two is part of the nuance
Speaker 3: of investing. You may own a slightly lower quality business
Speaker 3: because the price is so extreme, But the characteristics that
Speaker 3: we look for in every business have to do with
Speaker 3: the durability, because we buy businesses thinking we will our
Speaker 3: goal is to own it forever. Our goal is for
Speaker 3: the return to be driven by the year earnings yield
Speaker 3: on the business over time, not by some change in
Speaker 3: the valuation and finding an exit strategy. And so those
Speaker 3: sorts of characteristics are exactly the characteristics you would look
Speaker 3: for if I said you've got to put a business
Speaker 3: away for your kids or your grandkids. So you know
Speaker 3: the nature of the business, the returns on capital, the
Speaker 3: competitive modes, the nature the balance sheet, the risk and
Speaker 3: very importantly the character of the people running it. We
Speaker 3: spend a lot of time on management evaluation in this
Speaker 3: land of AI. You know, I just came back from
Speaker 3: the Markel annual meeting. You know, character will not show
Speaker 3: up efficiently, I don't think in the AI world. And
Speaker 3: boy does it matter when you think about navigating in
Speaker 3: unpredictable future. Just that ability to be resilient, to adapt,
Speaker 3: but always to be investing the money as if it's
Speaker 3: your own. And they're CEOs that do that. So those
Speaker 3: are the nature of the business. And then the valuation
Speaker 3: discipline is sort of the securities analysis part of what
Speaker 3: we do. If the first part is business research, then
Speaker 3: it's the securities analysis. It's adjusting the income statement, you know,
Speaker 3: that's where the accounting training comes in, and it is
Speaker 3: understanding the incremental returns on capital, and it's adjusting the
Speaker 3: balance sheet, every account on the balance sheet, because of
Speaker 3: course gap earnings is a convention, but it may or
Speaker 3: may not reflect reality. And so you know, you put
Speaker 3: those two things together and we build an i RR,
Speaker 3: an internal rate of return forecast. We work on this
Speaker 3: concept of owner earnings in each business, and then we
Speaker 3: focus on the quality and the durability of the business.
Speaker 2: I can help but point out that you talk about
Speaker 2: buying or owning businesses, not buying stocks. That seems to
Speaker 2: be like a very fundamental distinction compared to most fund manager.
Speaker 3: It's so profoundly important, you know. It is. We view
Speaker 3: ourselves as business owners. We view the management as our partners.
Speaker 3: In most cases, we view the you know, the signs
Speaker 3: of short termism as dangerous. It's one of the reasons
Speaker 3: we feel that the activist movement has completely lost the
Speaker 3: thread and should be greatly resisted, whereas it was very
Speaker 3: useful when it started. And we can talk about that later.
Speaker 3: But absolutely, we're owning businesses, and we're trying to own
Speaker 3: businesses that are compounding machines. Right. I watched what it
Speaker 3: meant for my grandfather to owned businesses for twenty thirty
Speaker 3: forty years. You know, I look at our own portfolio.
Speaker 3: I look at companies like you know, American Express or
Speaker 3: Wells Fargo or JP Morgan. In the financial world, look
Speaker 3: at you know more recently at companies like Amazon Texas Instruments.
Speaker 3: You look at what a business can do compound over
Speaker 3: twenty thirty years. I mentioned Markel. You know, when I
Speaker 3: first met the now CEO of Markel, we met in
Speaker 3: Omaha at the Orpheum Theater at a Berkshire Annual meeting
Speaker 3: in like nineteen ninety. The stock was at like nineteen
Speaker 3: or twenty and it's at two thousand now, you know.
Speaker 3: And by the way, they have an activist idiotic saying
Speaker 3: they split up the company. It's like company's doing fine,
Speaker 3: and it's a company that is being built to last.
Speaker 3: And the idea of getting a quick sugar fix because
Speaker 3: you can sell some part to private equity at a
Speaker 3: premium that doesn't serve capitalism and it really won't serve
Speaker 3: the long term shareholders of that business.
Speaker 2: You mentioned a number of financials in that list. I'm
Speaker 2: kind of curious because financials have had some pretty good years.
Speaker 2: They've had some pretty rough years. Obviously, the financial crisis
Speaker 2: was devastating. Although my pet theory about JP Morgan Chase
Speaker 2: is when they had their subprime problem, it predated everybody
Speaker 2: by five years, and there was still a bid when
Speaker 2: they had to get out, so they got a little lucky,
Speaker 2: and they happen to have a particularly talented CEO. But
Speaker 2: this concentration of financials, I'm curious what led to it,
Speaker 2: And I'm curious of the relationship between what some people
Speaker 2: describe as high conviction investing and concentration in a particular
Speaker 2: sector like financials.
Speaker 3: Well, I think high conviction investing is exactly the right description.
Speaker 3: And if we end up with a focus on a
Speaker 3: particular sector, it's not necessarily because of a view of
Speaker 3: the sector. It's because the individual companies. Financials is one
Speaker 3: of the most misleading sectors there is, because to me,
Speaker 3: what creates a correlation risk is when businesses are tied
Speaker 3: to the same macroeconomic variables. Financials is a massively broad category.
Speaker 3: There are financials that have risk if the wind blows
Speaker 3: in certain parts of the world, the financials that have
Speaker 3: risk if interest rates change, financials that have risked that
Speaker 3: have to do with recessions, some to capital markets. They
Speaker 3: are all different. And I'll give you a really powerful example.
Speaker 3: I started our financial fund, I don't know, something like
Speaker 3: nineteen ninety. That fund, from then to today has outperformed
Speaker 3: the S and P five hundred, and it has outperformed
Speaker 3: the S and P five hundred quite meaningfully when you
Speaker 3: compound it out. At the time we started it, I
Speaker 3: didn't even know there was a financials index. But it
Speaker 3: was founded with this belief that one of the and
Speaker 3: my grandfather of course, specialized in financials. I started as
Speaker 3: a financials analyst, and he had a phrase that he loved,
Speaker 3: which is, in financials you can find growth stocks in disguise.
Speaker 3: And he said, the reason is is that you have
Speaker 3: very You have businesses industries that are huge where companies
Speaker 3: can grow for a long period of time by simply growing.
Speaker 3: Just this year, Progressive finally passed State Farm. Progressive has
Speaker 3: probably compounded in the high teens for thirty years and
Speaker 3: it still is. Just became maybe the largest insurance company
Speaker 3: in personal Auto's massive industries where you can compound for
Speaker 3: a long time without outgrowing your sector. Second advantage, the
Speaker 3: business model doesn't really go obsolete, right making us spread
Speaker 3: on money is about the oldest business there is, maybe
Speaker 3: maybe the second oldest, thank you. What else, It's an
Speaker 3: industry where you have huge dispersion of outcomes but relatively
Speaker 3: homogeneous valuations. So you I mentioned Progressive I mean, you
Speaker 3: have companies that have grown Capital one. You look at
Speaker 3: Capital One's growth record from nineteen eighty seven today, and
Speaker 3: yet it's trading at nine or ten times earnings because
Speaker 3: it's a financial I'm like, it looks like a growth
Speaker 3: stock to me. Right, I've got it's still run by
Speaker 3: the founder, it's a fintech company, it's a data science company.
Speaker 3: It's in the top ten of all holders of AI
Speaker 3: and machine learning patents. But it trades at nine point
Speaker 3: eight times earnings and one point two times book value
Speaker 3: liquidating value with a mid teen's return on equity. It
Speaker 3: seems just nuts to me, but whatever, we love it.
Speaker 3: So that's the idea of growth stocks and discussion. And
Speaker 3: the last advantage of financials is that culture is a
Speaker 3: defining and sustainable difference.
Speaker 2: This is a theme I have heard from so many
Speaker 2: really savvy executors CEOs as well as investors. How do you,
Speaker 2: as an investor wrap your arms around culture? It feels
Speaker 2: like you almost have to be in it to see it, Like,
Speaker 2: is it something that as an outside investor you get
Speaker 2: access to? You how do you identify quality culture?
Speaker 3: Well, it's it's a perfect question, but I'll give you
Speaker 3: the punchline for the differentiation. Last year, our financial fund,
Speaker 3: which is ninety five percent in large cap financials, outperformed
Speaker 3: the S and P Financials Index and the XLF the
Speaker 3: largest financials ETF by twelve one hundred basis points.
Speaker 2: Not too shabby, right, So, I mean it was a great.
Speaker 3: Year for us. But the point is that they're in
Speaker 3: large cap financials. We're in large cap financials. How can
Speaker 3: you get such dispersion? Right?
Speaker 2: But the same is they own everything and you own them.
Speaker 3: But they're very concentrated. They're concentrated in the megacap banks
Speaker 3: by and large and Visa and MasterCard, you know. But
Speaker 3: we're fairly concentrated to We only have twenty twenty five
Speaker 3: names and they, you know, twenty or twenty five names
Speaker 3: are probably eighty percent of the index.
Speaker 2: Does the gap come from the stock selection or the
Speaker 2: screening out of what you don't like?
Speaker 3: Well, it really goes back to the culture question. So
Speaker 3: to bring it full circle to your question about culture,
Speaker 3: what it is is that within financials, we are looking
Speaker 3: for the companies that we feel can be compounding machines,
Speaker 3: and we're looking for the companies where their culture creates
Speaker 3: a durable advantage. The reason culture can create an advantage
Speaker 3: in financials is because in most cases, your cost of
Speaker 3: goods sold is an estimate, and if you have an
Speaker 3: aggressive management, they can use accounting to upfront earnings that
Speaker 3: you'll pay the piper three five, excuse me, ten years
Speaker 3: from now. So we think can look good for a
Speaker 3: long time, whereas if you do the opposite, if you
Speaker 3: have a good culture, you're understating the near term, but
Speaker 3: you're building cushion for the long term. And so when
Speaker 3: the times go rough, when the tide goes out, and
Speaker 3: you see who's swimming without a bathing suit, that's where
Speaker 3: the culture really matters. Now, you mentioned all of the
Speaker 3: crises that I've seen over my career. I've seen a
Speaker 3: lot of these management teams and these companies go through
Speaker 3: crises and you see who's wearing a bathing suit. So
Speaker 3: we just went through an interest rate crisis right to
Speaker 3: five hundred base and we used to get questions from
Speaker 3: clients all the time, don't you own first Republic? In October,
Speaker 3: my colleague Pierce Crosby wrote a research report just internal
Speaker 3: just for his own saying he's just startled by the
Speaker 3: amount of risk Silicon Valley and First Republic are taking
Speaker 3: He said, it's sort of amazing look at the duration
Speaker 3: on their assets. They're assuming that their liabilities, their deposits
Speaker 3: are going to be with them for eight, ten, twelve
Speaker 3: years and that they're uncorrelated. So, you know, we used
Speaker 3: to get questions, why don't you own them? They've been
Speaker 3: they've had such great growth records, and our view as well,
Speaker 3: it's been a mistake not to own them in terms
Speaker 3: of they've outperformed. But we are not going to own
Speaker 3: the companies that are optimized to the upcycle, right, and
Speaker 3: that's a different culture. They had a growth culture, but
Speaker 3: it was it blew them up, and so you know,
Speaker 3: we instead looked at companies like well JP Morgan was
Speaker 3: an outstanding example. Wells Fargo was capital one where they
Speaker 3: didn't reach for the easy money of taking that extra
Speaker 3: risk on the interest rates they could have. You know,
Speaker 3: Jamie Diamond stood up at an analyst meeting said I
Speaker 3: could add a billion or two billion dollars to my
Speaker 3: profits with a phone call, and I'm not going to.
Speaker 2: Do it because of the risk.
Speaker 3: Because of the risk, you guys want you know, I
Speaker 3: could put out my money for five seven years and
Speaker 3: he didn't do it. So when that you could see that.
Speaker 3: So some of it is quantitative. You identify culture by
Speaker 3: accounting choices. Look at how accident your reserves develop at
Speaker 3: insurance companies, look how credit loss developed, Look at the
Speaker 3: duration in the asset portfolio of a bank, look at
Speaker 3: the mark to market risks that an investment bank is taking,
Speaker 3: so on. So you can identify culture quantitatively in financials.
Speaker 3: That's a big advantage. But then the next part is qualitative,
Speaker 3: and there I think Warren put it best. He said,
Speaker 3: in a complex financial the CEO has to be the
Speaker 3: chief risk officer, and you could have somebody with that title.
Speaker 3: But if the CEO doesn't the nature and the complexity
Speaker 3: of the risks, they should not be the CEO of
Speaker 3: a financial company.
Speaker 2: So not only am I hearing a lot of Warren's
Speaker 2: voice in things you say, I'm also hearing a lot
Speaker 2: of similar companies Coca Cola, MX, Wells, Fargo coincidence.
Speaker 3: Well, I mean it would be strange if we ended
Speaker 3: up different. Of course, I always like it when we
Speaker 3: owned it first. So for example, we were I think
Speaker 3: the largest shareholder of General Ree before Berkshire bought it,
Speaker 3: and so and by the way, our research was not
Speaker 3: so good on that one. Really no, and as you
Speaker 3: see subsequently, Jenry did not perform very well for many years.
Speaker 3: It was And I think Warren would say, I mean,
Speaker 3: I think he has said publicly, I won't put words.
Speaker 3: I think he said that that was well, I'll put
Speaker 3: it this not his favorite pick. Yeah. Well, I'll tell
Speaker 3: you what, Charlie. Charlie came to visit us and we
Speaker 3: have a wall of mistakes where we frame the stock certificate.
Speaker 2: Is that what that is?
Speaker 3: Yeah? And Charlie was looking through it and he said,
Speaker 3: where the hell's here, Genery, And I said, Jenry wasn't
Speaker 3: a mistake. We got Berkshire stock for Jenry. That was fantastic.
Speaker 2: Did you have anything to do with the transaction or
Speaker 2: they just went out and bought him? And you happen
Speaker 2: to be a big O.
Speaker 3: And you know we we were big Geico shareholders, you know,
Speaker 3: so no, it was uh and we overlapped an MX
Speaker 3: but we but no, I mean we're much more diversified.
Speaker 3: We never owned Apple. We you know, there's there's huge differences.
Speaker 3: I mean, starting with the fact that you know, Warren
Speaker 3: has outperformed all investment advisors for fifty years and and so,
Speaker 3: but you'd be crazy not to study, you know, when
Speaker 3: Warren owned something, or to study Berkshire itself.
Speaker 2: And that makes a lot of sense. There's another distinction
Speaker 2: between the two of you. You say that you are
Speaker 2: neither deep value nor go go growth. So what does
Speaker 2: that leave you? You growth at a reasonable price Somewhere something
Speaker 2: is you love.
Speaker 3: Growth at a reasonable price because what are the other
Speaker 3: growth at unreasonable prices?
Speaker 2: That were unreasonable?
Speaker 3: And now, I think what we would say is it's
Speaker 3: obvious to us that growth is a component of value.
Speaker 2: Right, Growth is a component of value.
Speaker 3: So a company that grows profitably is more valuable than
Speaker 3: one that doesn't grow, right, I mean it's it's again,
Speaker 3: think of the business. A business that grows profitably is
Speaker 3: more valuable. A business that can redeploy its capital at
Speaker 3: high incremental rates of return is way more valuable than
Speaker 3: one that it can't, one that's capital intensive and shrinking
Speaker 3: and so on. So growth is a component of value.
Speaker 3: And the difference between us and a typical growth manager
Speaker 3: is we tend to believe more deeply, based on experience,
Speaker 3: that high rates of growth attract competition. Competition lowers returns,
Speaker 3: and so we believe in capitalism, and we believe that
Speaker 3: growth is hard and maintaining growth is hard. So we
Speaker 3: tend to be more skeptical than the average go go
Speaker 3: growth investor, but we tend to be more open to
Speaker 3: paying a fair price for a company that can grow
Speaker 3: profitably than the typical value investor. So so much of
Speaker 3: our research is about the durability of the growth, the
Speaker 3: competitive advantages that a business has. So our portfolio currently
Speaker 3: trades in aggregate. If you took all of our companies
Speaker 3: at something like fourteen times times earnings, well, the market
Speaker 3: middle of the role is at twenty or twenty one,
Speaker 3: the value indexes at nineteen times. And yet we have
Speaker 3: a portfolio of companies that have grown their earnings over
Speaker 3: the last five years. It's something like fourteen percent a year.
Speaker 3: So we feel we have what my dad used to
Speaker 3: call the value investors dream, right, and that's what we
Speaker 3: low cost, fast growth, low valuation, and durable sustainable.
Speaker 2: Growth really really fascinating. So before we jump too deep
Speaker 2: into the current state of affairs, I have to ask
Speaker 2: you about a quote of yours that I really like.
Speaker 2: As human beings, we don't welcome fear and panic, but
Speaker 2: as investors, we welcome the bargain prices that those emotions
Speaker 2: tend to produce.
Speaker 3: Discuss well, you know, obviously the market is of course
Speaker 3: a voting machine in the short term, it reflects psychology
Speaker 3: term a weighing machine.
Speaker 2: And that's that's a great quote I'm gonna write there.
Speaker 3: Yeah, and so psychology and helps shape prices. And what
Speaker 3: happens we find is that risk is you know, there's time,
Speaker 3: it's all, there's always risk. What varies is people's perception
Speaker 3: of it. And I think today we're in a time
Speaker 3: when people are underestimating risks and therefore prices are generally high.
Speaker 3: It's one of the reasons I find it so amazing
Speaker 3: that our portfolio is trading at fourteen times earnings. I'm like,
Speaker 3: you know, the market scares me at twenty one, twenty
Speaker 3: two times earnings, but our portfolio feels like this below
Speaker 3: long time averages. So I feel this disconnect where I'm
Speaker 3: simultaneously pessimistic about the market because of the euphoria. There's
Speaker 3: no skepticism, there's no fear in prices, and at the
Speaker 3: same time, very feel very comfortable with our portfolio.
Speaker 2: So let me push back a little bit, just to
Speaker 2: hear your reaction. We keep hearing artificial intelligence and Nvidia
Speaker 2: and all the semis being compared to the dot com era,
Speaker 2: and every time I hear that, aside from the fact
Speaker 2: that many of those companies forget profits, didn't even have revenues,
Speaker 2: and this is a giant revenue, giant profit era, markets
Speaker 2: today are training at twenty twenty two times. We finished
Speaker 2: the nineties at thirty two times. Theoretically, there's a ton
Speaker 2: of upside from here, especially if Earning's growth continues. Is
Speaker 2: is it the contrarian take that, hey, this market could
Speaker 2: go another five or ten years before things get really stupid.
Speaker 3: Well, what I'd say is, right now, as I look
Speaker 3: out there, I see two types of you know, end investor. Right.
Speaker 3: One is this sort of belief that we're on a
Speaker 3: plateau of permanent prosperity. This time is different permanently yes, yes,
Speaker 3: And and they are all in on the momentum trade,
Speaker 3: which has worked so well. Now I have a really
Speaker 3: i am believe that momentum investing, even though it's worked
Speaker 3: so well, to me is crazy because it's not common sense.
Speaker 2: It works until it stops, it works.
Speaker 3: Until it stops, and when it stops, you really feel
Speaker 3: foolish that the fact that you are paying an ever
Speaker 3: higher price you thought was a good thing.
Speaker 2: Why does price matter if it's going up by it
Speaker 2: if it stops going up exactly.
Speaker 3: And so that's one group of investors, and they're taking
Speaker 3: a lot of risk because they tend to be in
Speaker 3: the highest multiple parts of the market and the parts
Speaker 3: of the market where there is the most presumption that
Speaker 3: high margins and high growth rates are sustainable. And the
Speaker 3: data is over. I think fewer than three percent of
Speaker 3: companies can maintain a ten growth rate in revenue of
Speaker 3: twenty percent for more than a decade. Like fewer than
Speaker 3: three percent.
Speaker 2: I mean, and that's a huge growth rate for a
Speaker 2: long time.
Speaker 3: And there are a lot of valuations today that have
Speaker 3: that baked in. You get these analysts reports, and there's
Speaker 3: even fewer less than I think it's five tenths of
Speaker 3: one percent, but you could check me. It's either might
Speaker 3: be three tenths, but it's a low fraction of a
Speaker 3: percent that are able to maintain fifty percent margins for
Speaker 3: more than a decade. Those are very high margins. But again,
Speaker 3: there are in a lot of models right now, So
Speaker 3: I think there's risk on that. Now. The other side
Speaker 3: of people taking risk are the ones that are huddled
Speaker 3: in cash, saying it's the end of the world. Everything
Speaker 3: that's happening AI is going to swallow our children. The
Speaker 3: world is falling apart. Everything that's happening in washings, and
Speaker 3: they're sitting in cash, which is risky as well, really risky.
Speaker 3: I mean, just since two thousand, the purchasing power of
Speaker 3: a dollars down something like fifty five percent. Right in
Speaker 3: my grandmother's lifetime, I think the purchasing power of a
Speaker 3: dollar fell like ninety four ninety five percent, So.
Speaker 2: They're take sevand dollars for exactly.
Speaker 3: So though, I think these huge crowded sides of the market,
Speaker 3: the people sitting in cash and the people at the
Speaker 3: assuming the extreme growth, are both taking a lot of risk.
Speaker 2: That's a terrible barbell. You've just spake yes, Like the
Speaker 2: extremes are either either inflation is going to kill them
Speaker 2: or speculation is going to go.
Speaker 3: And where I would say, you know, we land in
Speaker 3: the middle is with this idea that there are durable,
Speaker 3: overlooked businesses right now and they're business as I say,
Speaker 3: we have a portfolio of twenty five companies trading at
Speaker 3: an aggregate portfolio of fourteen and a half times. By
Speaker 3: the way, that in includes owning some Amazon, it includes
Speaker 3: owning some Google, but also owning some Capital One, owning
Speaker 3: some Tyson Food, some MGM. You know which portfolio is this?
Speaker 3: This is our flagship portfolio. So there's the Davis Adventure Fund.
Speaker 3: But really the way people are finding us increasingly. Ten
Speaker 3: years ago, Barry we launched our ETFs. We were alone
Speaker 3: for nine years. Like no, we're the only true active
Speaker 3: manager running a value ETIM. I think our value ETAM
Speaker 3: which is called DUSA. D USA is the number one
Speaker 3: active or passive value ETF for three years. But nobody
Speaker 3: really cares. It's just you know, it's but that's all right.
Speaker 2: Although the past year or two we have seen a
Speaker 2: lot of flows. Hey, most of the money you're going
Speaker 2: to the passive indexes. But the things that the third
Speaker 2: or quarter that's not going there active exactly.
Speaker 3: So they're finding our way and I'm proud that we
Speaker 3: were so early. I don't mind being early, you know.
Speaker 3: And so but what I'd say is that the optimistic
Speaker 3: case layout, I think the three elements of change in
Speaker 3: the civilization that our increasing risk today is we certainly
Speaker 3: have a change in the monetary world order. Right, You
Speaker 3: and I spent our entire careers in a world of
Speaker 3: falling interest rates, approaching zero, falling inflation. All of the
Speaker 3: things that fed into that, you know, low wage pressure, deunionization, globalization,
Speaker 3: all of that stuff, all of that has stunningly and permanently,
Speaker 3: I believe come to an end. We are in a
Speaker 3: state where you know, we are printing so much money
Speaker 3: relative to what the interest rates are. I think there's
Speaker 3: a lot of risk, but certainly we're not going back
Speaker 3: to zero probably ever. Again, that was a once in
Speaker 3: history phenomena free money. The second big change is geopolitics.
Speaker 3: There's no question that for our entire career, we are
Speaker 3: in a world of globalization. We're in a world of
Speaker 3: functional peace, we are in a world of stability. We're
Speaker 3: in a world where the wall fell and markets doubled.
Speaker 3: All of these things that is also absolutely come to
Speaker 3: an end, and that increases risk. So those first two
Speaker 3: things increase risk. And what's the third ai there's this
Speaker 3: massive technological change that increases risk. It increases the risk
Speaker 3: of all different types of businesses, and it increases opportunity
Speaker 3: but increases risk. So when you have three fundamental shifts
Speaker 3: going on, all of which have unpredictable outcomes, and yet
Speaker 3: you have valuations not at all time highs, but elevated highs,
Speaker 3: certainly relative to the direction of travel of interest rates
Speaker 3: over time, then I'd say, you know, I like where
Speaker 3: we are with our fourteen fourteen yield. You know, solid
Speaker 3: growth rate in the businesses, durability AI as a lens,
Speaker 3: globalization as a lens, inflation as a lens. Put those
Speaker 3: things together. We sit with twenty five companies with these
Speaker 3: great characteristics in our etf or and our funds or
Speaker 3: SMA or however the advisor finds.
Speaker 2: Us really interesting. Coming up, we continue our conversation with
Speaker 2: Chris Davis, portfolio manager at Davis Advisors, discussing the current
Speaker 2: market environment. I'm Barry Ridults. You're listening to Masters in
Speaker 2: Business on Bloomberg Radio. I'm Barry Ridults. You're listening to
Speaker 2: Masters in Business on Bloomberg Radio. Chris Davis is my
Speaker 2: extra special guest. He is the chairman and portfolio manager
Speaker 2: of Davis Advisors. So I'm glad you mentioned add artificial
Speaker 2: intelligence as one of those three big shifts that are
Speaker 2: taking place. How do you, as an analyst and a
Speaker 2: fund manager separate what is a transformative technology and potentially
Speaker 2: a transformative source of value creation from just the rampant
Speaker 2: speculative excess that rears its head on a regular bag.
Speaker 3: Well, what we're seeing is Amara's law in full bloom,
Speaker 3: and Amar's law states that transformative technologies are overestimated in
Speaker 3: the short term, they're underestimated in the long term. We're
Speaker 3: in the overestimation hype phase. And what I would say
Speaker 3: we do is we recognize it as a transformative technology.
Speaker 3: That is absolutely a baseline assumption. Our other baseline assumption
Speaker 3: at this stage is that we don't see it as
Speaker 3: a winner take all. So we see it more a
Speaker 3: little bit like railroads or something where or the tele
Speaker 3: or electricity where the users maybe end up making more
Speaker 3: money than the builders. And so we will talk about
Speaker 3: hedging that bet. But we do think it increases the
Speaker 3: risk environment in terms of terrorism, it increases the risk
Speaker 3: of obsolescence in certain businesses. But we start with this
Speaker 3: idea that it's real. Then what we do is, as
Speaker 3: we do our research, we found every company we look
Speaker 3: at falls into one of five categories. It's the emerging winners.
Speaker 3: That's where all the heat is, all the speculation, and
Speaker 3: there there's real danger. You and I started very early
Speaker 3: talking about Cisco and remembering, well, the three obvious winners
Speaker 3: of the Internet were AOL, Yahoo, and Cisco. You know,
Speaker 3: the two don't exist and one's a fraction of what
Speaker 3: it was. And so picking the emerging winners in the
Speaker 3: early hype phase is risky. But we'd say, if you
Speaker 3: want to look in that space, focus on the businesses
Speaker 3: that have a real shot at being emerging winners but
Speaker 3: do not have to constantly raise capital, have proven business models,
Speaker 3: proven leaders, and businesses that are accreted by the investments
Speaker 3: that they're making, so that they earn more money by
Speaker 3: making these investments, even if it takes longer than not
Speaker 3: the hyperscale, not the hyperscalers, I think that that is.
Speaker 3: And so for us, that's where we've sat with a
Speaker 3: little bit of Google, we still have Meta and Amazon.
Speaker 3: We've trimmed the first two because they were huge holdings
Speaker 3: for us because we bought them when they were so
Speaker 3: out of favor. But if you're going to play in
Speaker 3: the emerging winners, that's The first second category is, Okay,
Speaker 3: who are the enablers of this technology? Right, that's the
Speaker 3: pigs and shovels mindset. They're the ones that are going
Speaker 3: to benefit from the spending wave but will not be
Speaker 3: penalized if the return on the spending is very low.
Speaker 2: So semiconductors.
Speaker 3: So yeah, I would say there for us, it's been
Speaker 3: analog chips, Texas instruments, it's been semiconductor capital equipment. We
Speaker 3: are a big shareholder of Samsung, you know, which did nothing, nothing, nothing,
Speaker 3: and then went up fourfold and in the.
Speaker 2: Year they're driving the entire toss by UH in Korea.
Speaker 3: It's a amazing, amazing So but you know again that
Speaker 3: we viewed those as enablers. But in Indian enablers, I
Speaker 3: would also include things like natural gas and copper. Right,
Speaker 3: they're going to be they are big, big beneficiary. So
Speaker 3: we own you know, Kotera which is now Devin, UH Conico, Phillips,
Speaker 3: UH Tourmaline. You know, our focus is on natural gas
Speaker 3: and copper. Okay, so those are the enablers, the users
Speaker 3: who are going to be the beneficiaries use it. Well, there,
Speaker 3: You've got to think UH Financials is a great extent
Speaker 3: anything that where you have a big amount of laptop
Speaker 3: class workers. Right, it's what Elon called the laptop class
Speaker 3: that you know, it's likely that AI will do to
Speaker 3: the laptop class what globalization did to to blue collar workers.
Speaker 2: Meaning very much hollow it out.
Speaker 3: Hollow it out, hollow it out. The best will still
Speaker 3: have work, the best will be more valuable, they'll be
Speaker 3: more productive. But there's going to be a you know
Speaker 3: a lot of unemployed second year lawyers and things like that,
Speaker 3: and so that that and so healthcare you know, claims processing, uh,
Speaker 3: compliance functions, things like that. So there we focus on
Speaker 3: the banks that have the scale, the tech stack and
Speaker 3: the management to do it. So Capital one number one.
Speaker 3: I keep Wells Fargo on that list. I think US
Speaker 3: Bank gets over that crosses that chasm. Uh so those
Speaker 3: but also with JP Morgan Chase has done such a
Speaker 3: great job. But the valuation is how do you.
Speaker 2: Put the MX's and master card visas of the world.
Speaker 3: We don't own Visa or MasterCard, and we have a
Speaker 3: very small position in AMEX. And essentially the reason is
Speaker 3: we just think that that is an area where there
Speaker 3: is a big spread. They may be on the other
Speaker 3: side but boy, there are a lot of people, especially merchants,
Speaker 3: that would like to figure out some way to bypass
Speaker 3: that big number. It's a big number.
Speaker 2: This first time in my lifetime, I have started noticing
Speaker 2: cash and credit card prices on restaurant may yeah. Absolutely,
Speaker 2: it's never a thing.
Speaker 3: Though, and you really see it when you travel. Yeah,
Speaker 3: and so that we and again those are they're so
Speaker 3: highly valued at thirty times earnings for visa, you know,
Speaker 3: it just seems does there's too much risk there? I'll
Speaker 3: own the capital one at nine times. So those are
Speaker 3: the users, right. Then the next category or what Jeff
Speaker 3: Bezos we call them the the indifferent or the protected? Right,
Speaker 3: So what Jeff Bezos when he said people ask me
Speaker 3: what's going to change? They all ask me what's not
Speaker 3: going to change? That's a very important question. So there,
Speaker 3: what do we you know, Tyson Foods, all right, Chicken's
Speaker 3: not going to change, right, and.
Speaker 2: We have Chicken's not going to lose their jobs.
Speaker 3: Yeah, yeah, Chicken. It's a good shape. And you know,
Speaker 3: but here you have to be careful because you don't
Speaker 3: have high growth rates, so you don't want to overpay.
Speaker 3: And they're cyclical businesses, so you don't want to pay
Speaker 3: it at the top of a cycle. So Tyson, I
Speaker 3: think is has a low multiple on cyclically depressed earnings.
Speaker 3: What else does MGM? I think owning you know, fifty
Speaker 3: percent of the Las Vegas strip, and you know twenty
Speaker 3: or thirty percent of Macau and one hundred percent of
Speaker 3: the only legal gambling in Japan and Osaka when it
Speaker 3: opens twenty twenty nine, that's very valuable. I don't think
Speaker 3: that gets disintermediated by AI. So call those that protected
Speaker 3: the what won't change. The last category is the walking dead,
Speaker 3: and there you know you mentioned Visa and MasterCard. I
Speaker 3: don't know, title insurance, I don't know. There are all
Speaker 3: sorts of things where it is really amazing how much
Speaker 3: money is made for something that you should be able
Speaker 3: to get around. We've seen some of the pressure in
Speaker 3: the SaaS companies, and so that's the lens that we
Speaker 3: look at for all of our companies. We put them
Speaker 3: through this lens of this fast changing We want to
Speaker 3: stay nimble and barry. One of the things I think
Speaker 3: is really important is I think this is a world
Speaker 3: where taking liquidity risk is really dangerous because there's so
Speaker 3: much flux. So I think that's some of the pressure
Speaker 3: we're seeing in private equity, private credit. I think people
Speaker 3: are saying, why did I lock up my money seven years?
Speaker 3: For seven years if you're lucky, Yeah, it's going to
Speaker 3: be longer, I think. So I think that wheels are
Speaker 3: coming off that. I think that indexes. Remember the Kodak
Speaker 3: you ready for a number, ten million digital cameras had
Speaker 3: been sold when Kodak was still in the top third
Speaker 3: of the S and P five hundred.
Speaker 2: It's amazing, isn't that amazing?
Speaker 3: And it's like ten million people knew they would never
Speaker 3: buy a roll of film again. It was dead. And
Speaker 3: so the advantage you know, when Japan peaked in the eighties,
Speaker 3: every active every active manager in international investing outperformed for
Speaker 3: the next ten years by just saying, oh, Japan's going down,
Speaker 3: I'm out. And so the index got killed because it
Speaker 3: had to sort of go down with the ship. So
Speaker 3: I think nimbleness, liquidity, flexibility, and this sort of research
Speaker 3: lens going to actually become more valuable. So I think
Speaker 3: we could see some of the time tested things that
Speaker 3: worked in the last decade diven end Darling's momentum private
Speaker 3: equity indexing. I think all of those things could be
Speaker 3: challenged given this fast changing world.
Speaker 2: So I'm glad you brought up a few things there,
Speaker 2: because when you look at some of the fallout from
Speaker 2: low cost indexing, the Vanguard effect, Blackrock, whatever you want
Speaker 2: to call it, they have all put the fund industry
Speaker 2: under a lot of pressure. There's fee compression. There's been
Speaker 2: a move to not just indexing, but to ETFs generally.
Speaker 2: So when your own business, you're looking at businesses with
Speaker 2: moats and businesses with defendable proceeds and a good culture.
Speaker 2: You're running a business with a lot of employees and
Speaker 2: a lot of clients. How do you respond to this
Speaker 2: external pressure? How do you manage not the investments, but
Speaker 2: the business of investing when it's just becoming more competitive
Speaker 2: and more challenging than ever.
Speaker 3: Well, we're lucky because we're one. We're a very we
Speaker 3: charge low fees, right, so we it's you know, if
Speaker 3: you charge two and twenty, you know.
Speaker 2: You're if only I could, I know, I'm just I mean,
Speaker 2: emotion intellectually, I have a problem with that, but part
Speaker 2: of me is like nice work, if.
Speaker 3: You I know, I know, I spoke to a guy
Speaker 3: that charged two and twenty years ago, and I said,
Speaker 3: why too and twenty? What's the business model? He said,
Speaker 3: I can't get three and thirty. So we've always we've
Speaker 3: always just run with this idea, you know, Charlie one
Speaker 3: said to me, Charlie Munger, you know what's wrong with
Speaker 3: giving people a bargain right, or at least a fair
Speaker 3: price right, And it makes it easier for you to
Speaker 3: outperform over time. So so I feel one, we two.
Speaker 3: We're a frugal place. You know, I work with seven colleagues.
Speaker 3: We've been together on average twenty years, twenty five years
Speaker 3: average experience. And we would do this with no outside money,
Speaker 3: right because of the inside money. So we run it
Speaker 3: with what I would call a real family office mindset,
Speaker 3: with our own money alongside in a very low cost operation.
Speaker 3: But we like And the last thing, Barry is we
Speaker 3: are in a lasting game. What I can tell you
Speaker 3: is if ninety percent of the market was passive, the
Speaker 3: remaining ten percent of active would make a fortune.
Speaker 2: I've said that exact thing. Hey, if indexing is taking over,
Speaker 2: doesn't that create all sorts of inefficiencies for a savvy
Speaker 2: active mass.
Speaker 3: Absolutely? And I you know, I don't think it's a
Speaker 3: coincidence that we started out performing the ESSEY. I mean,
Speaker 3: we've outperformed the value index for all periods, but we
Speaker 3: but we lagged the S and P in this momentum market.
Speaker 3: But that changed about four years ago, and nobody's talking.
Speaker 2: About it coming out of the pandemic.
Speaker 3: But basically, yeah, we've been grinding an advantage over the
Speaker 3: S and P for the last three three and a
Speaker 3: half years. I mean, and this is with less than
Speaker 3: half the weight in technology that the index has so
Speaker 3: underweighted the hottest sector. But yet we've been grinding out
Speaker 3: an advantage for three or four years. Why And I
Speaker 3: think it's just because there's way more money index than
Speaker 3: is thought of. There's way more money in momentum than
Speaker 3: is And when I say there's more in indexing, it's
Speaker 3: because there's so much closet indexing. So I think, I
Speaker 3: don't think it's impossible that we're already at seventy percent
Speaker 3: functionally indexed, so that will really help us. So we're
Speaker 3: in a lasting game. We got the balance sheet to
Speaker 3: do it. We're going to be on the other side.
Speaker 2: Huh, that's really fascinating. You mentioned you guys would just
Speaker 2: do this without outside money. But let's put some flesh
Speaker 2: on those bones. Davis Advisors, the company, the Family Foundation,
Speaker 2: you and your partners employees. You collectively have more than
Speaker 2: a few billion dollars in the fund, so you are
Speaker 2: not only a line with your clients. I almost feel
Speaker 2: like skin in the game has become a cliche. But
Speaker 2: the question I want to ask is being invested that
Speaker 2: way alongside the clients, how does that affect your decision
Speaker 2: making process? And what does that do when you're going
Speaker 2: through one of those periodic crises that we've seen so
Speaker 2: much over the past twenty five years, dot COM's GFC pandemic.
Speaker 2: How does having skin in the game affect your decisions?
Speaker 3: Well, I think it makes us much more rational and
Speaker 3: much more long term. It means that, you know, I
Speaker 3: once had a colleague that we had to part ways
Speaker 3: because he said that, you know, I was so unimpressed
Speaker 3: by things like momentum, even if they worked. And he said, look,
Speaker 3: if I had a blind monkey in my office pointing
Speaker 3: to the newspaper every day at a stock and every
Speaker 3: single day that stock went up, that it pointed to
Speaker 3: whatever stock it pointed to went up every day, he said,
Speaker 3: you could watch that monkey for six months. You could
Speaker 3: watch it for a year, you could watch it for
Speaker 3: two years, and you still wouldn't invest with the monkey.
Speaker 3: And I said, of course I wouldn't. It's a blind monkey, right,
Speaker 3: this is my money, this is my client's life savings.
Speaker 3: You think I'm going to say, oh, the blind monkey
Speaker 3: pointed at the paper. So when we're in an environment
Speaker 3: where the market is on a tear and people are saying, oh,
Speaker 3: you're dinosaurs, we're able to hold our discipline. In two
Speaker 3: thousand and seven, we had our financial fund had lagged
Speaker 3: all other financial funds, not all, but most other financial
Speaker 3: wess because we were underweighted in real estate and we
Speaker 3: didn't own any Fanny, we didn't own any Freddy, we
Speaker 3: didn't own any country Wide, we didn't own bear Stearns,
Speaker 3: we didn't own WAMU. And people would say, wow, you're
Speaker 3: like a dinosaur, you know, And it's because it's our money,
Speaker 3: and so we don't mind if it takes a while
Speaker 3: for the reality for that weighing machine to work. What
Speaker 3: we look at every years, did the companies get stronger,
Speaker 3: did they get heavier, did they get more valuable? And
Speaker 3: if so, we view our research as working. Sometimes the
Speaker 3: stocks don't go up, sometimes they do, but we're focused
Speaker 3: on the businesses.
Speaker 2: On the process, and not just what's going up that day.
Speaker 2: You know, the blind monkey reminds me of a fascinating
Speaker 2: quote from Ken French of Dartmouth. Michael Mobison has written
Speaker 2: a lot about the separation between skill and luck and
Speaker 2: French of Fama. French had said, you know, it's very
Speaker 2: challenging to tell the difference between skill and luck with
Speaker 2: fund managers, and to really have a data set where
Speaker 2: you can make an informed decision takes about twenty years.
Speaker 2: So if you're going to wait for that blind monkey,
Speaker 2: you got to wait twenty years. Well, and you're starting
Speaker 2: out with the blind monkey, I think we have to
Speaker 2: assume that it's luck and not skill.
Speaker 3: Well, and look, Berry, your clients come to you. You
Speaker 3: could say that it's because of your performance, and performance matters. Well, well,
Speaker 3: I was going to say, what really matters is trust,
Speaker 3: right and conviction, And so one of the things that
Speaker 3: you know, we have clients that say, hey, you went
Speaker 3: through a period of underperformance, you were at a sync
Speaker 3: with the market. We weren't worried. You're building wealth for
Speaker 3: us every year we don't care all this index one here,
Speaker 3: the index went there. We're with you because we have
Speaker 3: conviction that you'll get us to our retirement, You'll get
Speaker 3: us to our kids college funding. You'll help us achieve
Speaker 3: our goals and maintaining that's something you do with your
Speaker 3: own money. You don't chase the hot dot. But if
Speaker 3: you're an investment manager and all of your value comes
Speaker 3: from the assets under management, you have to chase the
Speaker 3: hot dot. So trust is an undervalued part of the
Speaker 3: promise and the value that an investment manager can give
Speaker 3: to their clients if they If your clients trust you,
Speaker 3: they will get a better return even if you underperform
Speaker 3: an index. If you are if their trust is able
Speaker 3: to keep them invested through the ups and downs.
Speaker 2: Huh really really fascinating. All right, last question before I
Speaker 2: get to my favorites that I ask on my guests.
Speaker 2: What do you think investors are not generally talking about
Speaker 2: thinking about but perhaps should be, could be a topic
Speaker 2: of geography and asset class What important issue is kind
Speaker 2: of getting overlooked these days?
Speaker 3: Well, I think you know, I think this, These three
Speaker 3: big transitions in the economy are going to turn a
Speaker 3: lot of what's become conventional wisdom about investing upside down
Speaker 3: for a while. So I think you know what hasn't worked?
Speaker 3: You know, active management hasn't worked. What hasn't worked? Value
Speaker 3: price discipline hasn't worked. I think you're seeing that. What
Speaker 3: what has worked? Oh, you know alternatives, you know, illiquidity
Speaker 3: that's been great. What you know has worked? That I
Speaker 3: think is dangerous. You know, dividend aristocrats absolutely, I think
Speaker 3: that any you.
Speaker 2: Think divit and aristocrats are dangerous because.
Speaker 3: Because they're looking in the rear view mirror and they
Speaker 3: are not factoring in these big three changes that we
Speaker 3: talked about.
Speaker 2: Well, there isn't that the prob with all models.
Speaker 3: Yeah, Kodak was a dividend aristocrat, you know, Xerox was
Speaker 3: a dividend aristocrat. Polaroid was a dividend And that's fine
Speaker 3: unless there is systemic change, right, And when you have
Speaker 3: a big change like you had coming out of the seventies,
Speaker 3: you know, and the change into the eighties nineties, you know,
Speaker 3: you have these big changes and then everything that worked,
Speaker 3: you know, everything that helped you survive the crash and
Speaker 3: the depression in nineteen forty eight, you could say I'm
Speaker 3: not greedy. I just want to own bonds. Stocks are
Speaker 3: too dangerous, and you were wiped out in a generation
Speaker 3: and bonds became certificates of confiscation. So I think people
Speaker 3: are underestimating how much these conventional strategies, alternatives the rear,
Speaker 3: the backward looking models, including even momentum indexing and versus active.
Speaker 3: And I would even maybe add international International had underperformed
Speaker 3: for so long, and you know.
Speaker 2: Just the past two years starting to look.
Speaker 3: Starting to look pretty good.
Speaker 2: So you like international.
Speaker 3: I like international. We run an international ETFDINT and it's
Speaker 3: just like us. It's all stock picking. It's run by
Speaker 3: my partner, Danton, you know, and our family probably has,
Speaker 3: you know, always keeps probably fifteen to twenty percent our
Speaker 3: assets an international And that looked really stupid until two
Speaker 3: years ago, and it's looking a little better. So I
Speaker 3: think those conventional things are being likely to turn upside down.
Speaker 2: What's the old joke? Being diversified means there is always
Speaker 2: something to apologize for, absolutely all right, So let me
Speaker 2: jump to my favorite questions I ask all my guests.
Speaker 2: Even though I would love to stay here and keep
Speaker 2: you chatting for another three hours, I know you have
Speaker 2: places to go on people to see And the first
Speaker 2: question I always ask, I kind of know the answer,
Speaker 2: but I'm going to give you another opportunity at another
Speaker 2: swing at it. Who were your mentors who helped shape
Speaker 2: your career? And I kind of see four people already.
Speaker 3: Well, you certainly got my dad, my grandfather, and mine
Speaker 3: and Charlie. I think if I was gonna add another one,
Speaker 3: I would add Tom Gaynor, the CEO of marc Al.
Speaker 3: I just think, you know, that sort of principled stewardship leadership,
Speaker 3: that servant leadership, a company that is built with an
Speaker 3: enormous durability and culture of stewardship in mind. You know,
Speaker 3: he's you know, we've served on boards together. He's helped
Speaker 3: me through difficult times. I've done my best to help
Speaker 3: him through difficult times. It's a great thing to go
Speaker 3: through life surrounded by people you admire, and of course
Speaker 3: I get to work with people I admire, and that's
Speaker 3: big plus.
Speaker 2: Huh, really really interesting. Let's talk about I know you're
Speaker 2: a fellow reader. What are some of your favorite books?
Speaker 2: What are you reading currently?
Speaker 3: Well? I have too many favorite books to list, but
Speaker 3: I all.
Speaker 2: The way people always tell me, oh that's my favorite question.
Speaker 2: I'm always looking for something.
Speaker 3: Well, I'll give you the most recent one I read
Speaker 3: that I think is a good antidote to the AI
Speaker 3: phenomena or the AI highysteria, or or the AI the
Speaker 3: the obsession, that's a better word. And it's a book
Speaker 3: called Alchemy. The author is Rory Sutherland. Yeah, I think
Speaker 3: that's a very useful.
Speaker 2: Book to read right now on marketing and advertising.
Speaker 3: It's really on ways in which we maybe fetishize. If
Speaker 3: I said that, right, rationality and that when you look
Speaker 3: at human behavior, it's very irrational, but it's often irrational
Speaker 3: and predictable ways. And the more we say what's the
Speaker 3: rational solution to a problem and expect people to obey that,
Speaker 3: the more we're going to keep getting crazy outcomes. People
Speaker 3: react in ways that you know, people react to placebos,
Speaker 3: but we don't study placebos. Right that. The example he
Speaker 3: gives that I love is if you wanted to create
Speaker 3: a really spectacular competitor to Coca Cola and you hired mckensey,
Speaker 3: they would say, well, you should make something that tastes good,
Speaker 3: sell it a little cheaper, and make it ubiquitous. What
Speaker 3: you wouldn't say is make it more expensive, make it
Speaker 3: taste bad, and put it in a smaller can. And
Speaker 3: that's red Bull. And so there's a lot to study
Speaker 3: in a case like that. How has that worked so well?
Speaker 3: So I think alchemy is a useful one now, you know.
Speaker 3: I think everybody should read themselves and then have their
Speaker 3: kids read Morgan Housel's two best books, which should be
Speaker 3: read as a single book, The Psychology of Money and
Speaker 3: The Artist. They go together. I said, one is like
Speaker 3: the sequel to The Godfather. It's the Godfather too. It's
Speaker 3: not a different movie. It's it's it's the culmination in
Speaker 3: a way.
Speaker 2: And you skip three. Okay, that's a three, just doesn't.
Speaker 3: I agree? I agree. And then for a third book,
Speaker 3: you know, just the one that immediately comes to mind
Speaker 3: at the moment is is Americana. Uh. It's a book
Speaker 3: by there's two books by the same name. I know
Speaker 3: because Charlie had told four hundred years of American Capitalism.
Speaker 3: I love that book that I had him on the
Speaker 3: podcast years ago.
Speaker 1: Yeah.
Speaker 2: Spectacular, spectacular, and and it's just really just I think
Speaker 2: people are just so unaware of the history of American
Speaker 2: capitalism and that book just does a fantastic job laying
Speaker 2: out the success.
Speaker 3: And it will help you as an investor if you
Speaker 3: think in chapters of that book, if you think about
Speaker 3: okay Ai is unfolding. You know, he talks about the
Speaker 3: interstate highways being built. Well, the interstate highways were built.
Speaker 3: You know who made money? Right McDonald's Wendy's right. The
Speaker 3: railroads were built. Who made money? It wasn't the railroads, right,
Speaker 3: it was the factory. Is the ability to distribute? And
Speaker 3: who too were the dead men walking? You know when
Speaker 3: the car was developed, But there were three thousand car companies, right,
Speaker 3: there were two three hundred and seventy one publicly traded
Speaker 3: internet companies. You know, that's why picking the emerging winners
Speaker 3: in the early stages is tricky. But think of the chapter,
Speaker 3: think of that whole arc, and that's a terrific book.
Speaker 2: What are you streaming these days? What's keeping you entertained?
Speaker 2: Either Netflix, podcast, whatever?
Speaker 3: Well, you know, anybody who knows me knows that I
Speaker 3: watch almost nothing, and I particularly don't watch sports. I
Speaker 3: don't know a lot about sports. With one exception. I
Speaker 3: love ice hockey, and I love ice hockey in part
Speaker 3: because we had a lot of family history. My mom's
Speaker 3: family helped start the NHL and founded the Boston Bruins.
Speaker 2: Wait what, Yes, your mom's family helped start.
Speaker 3: The NHL and founded the Bruins, and we owned the
Speaker 3: Bruins through my childhood. Can you imagine? Come on, what
Speaker 3: a deal that my father, who's probably been to eight
Speaker 3: hockey games in his life, has his name carved on
Speaker 3: the Stanley Cup twice because he was Shelby Davis was
Speaker 3: the treasurer of the Boston Bruins, and so they won
Speaker 3: the Cup twice. He got his day own choice. But
Speaker 3: I think one of the things that I love about
Speaker 3: it is that my grandfather, in explaining his love for
Speaker 3: it to me, he said, you know, every sport handicaps
Speaker 3: the athletes. You know, you can't use your hands, you
Speaker 3: can't use your feet, you have to dribble, whatever it is.
Speaker 3: He said, hockey accentuates every human ability. And the skates
Speaker 3: and the skates, the stick, the pads, the oval, rink,
Speaker 3: the ice. I mean, it's just an amazing accelerator of
Speaker 3: human ability. And I guess the reason I think of
Speaker 3: it right at this moment, of course, it's we're moving
Speaker 3: into the Stanley Cup playoffs. We were in the last
Speaker 3: two rounds. But it's also because I think there's a
Speaker 3: way to look at AI as accentuating human ability.
Speaker 2: It's an accelerator.
Speaker 3: It's an accelerator. And what that could mean for healthcare,
Speaker 3: what that could mean for health care, inflation going negative.
Speaker 3: I mean, they're all sorts.
Speaker 2: Of We're already finding so many new molecules. If anything's
Speaker 2: going to find a cure to a lot of cancers,
Speaker 2: it's going.
Speaker 3: To be yes. And you know, and again we have
Speaker 3: to recognize that of course, like every technology, there are
Speaker 3: going to be negatives. They're going to be delays, and
Speaker 3: as people get disillusioned, we could get a big swing
Speaker 3: the other way. So equanimity. But again going back to
Speaker 3: Americana and I get to is Hockey. Think of those
Speaker 3: long chapters.
Speaker 2: All right, our final two questions. What sort of advice
Speaker 2: would you give to a recent college grad interest in
Speaker 2: the career in investing?
Speaker 3: Well, I would say, learn everything you can about business,
Speaker 3: and ideally work in business. You know, I met a
Speaker 3: guy down at Markel had their reunion just yesterday. I
Speaker 3: just flew back from Richmond yesterday. Their reunion is a
Speaker 3: great event. I recommend everybody go just buy a Shara Markel.
Speaker 3: Go to the reunion, you'll see something a lot, you know,
Speaker 3: a lot again was compared to Berger. But I just
Speaker 3: I love the value system there. But I met a
Speaker 3: guy who was an engineer at Altria, which is headquartered
Speaker 3: in Richmond. He owned a lot of Altria. He owned
Speaker 3: a lot of PMI, but he started investing for himself
Speaker 3: about twenty twenty five years ago. He showed me his portfolio,
Speaker 3: including his cost basis. He's built a wonderful record as
Speaker 3: an investor. And so, you know, I think I don't
Speaker 3: love all these kids going to the Goldman Sacks and
Speaker 3: to private equity. I think private equity is it was
Speaker 3: a wonderful business to begin with, and I think it
Speaker 3: is absolutely lost the.
Speaker 2: Thread, all the size. It's just ramped up.
Speaker 3: And they're all selling to themselves, right, and they're trying
Speaker 3: to get the widows and orphans in there so that
Speaker 3: they can hold some final sale, just like they did
Speaker 3: with you know, MLPs and the oil and gas partnerships
Speaker 3: in the eighties. And I really hate it. There are
Speaker 3: people within the world of private equity that I admire,
Speaker 3: that have built stunning records, but most of what's happening
Speaker 3: at this scale is just stealing money from pension plans
Speaker 3: for one downments four oh one k's and it's going
Speaker 3: into penhouses and ferraris. You know, where are the customer's yachts.
Speaker 3: Look at the returns over the last ten years of
Speaker 3: the average state pension plan, then look at the breakdown
Speaker 3: of assets, and you realize that all of the drag
Speaker 3: on their returns is alternatives.
Speaker 2: Huh amazing. Final question, what do you know about the
Speaker 2: world of investing today might have been useful back in
Speaker 2: the late eighties early nineties when you were first getting started.
Speaker 3: Well, every investor, if they're honest, will say that their
Speaker 3: biggest mistakes were what they sold, and so you know,
Speaker 3: I would say that I've always put all my money
Speaker 3: in the funds, and I think that's the right alignment.
Speaker 3: But I realize now which I didn't realize then, that
Speaker 3: there's some real differences, which is that, you know, in
Speaker 3: the funds we have to really think about diversification. If
Speaker 3: each time I bought a stock in the funds, I
Speaker 3: bought it in my own name, instead of putting my
Speaker 3: money in the funds and buying I probably would have
Speaker 3: just left it alone for the last thirty years and
Speaker 3: it would have done very well. So you know all
Speaker 3: of the you know, I first bought Amazon in two
Speaker 3: thousand and two, good time, you know, Yeah, but I
Speaker 3: sold it in two thousand and four, so thank you.
Speaker 2: I could, I could tell you the same thing Apple. Yeah,
Speaker 2: it was fifteen dollars or thirteen cash. Yeah, triple my money.
Speaker 2: I was a genius. I was like ten thousand percent ago.
Speaker 3: I know. We did the same thing in Apple, and
Speaker 3: it was we viewed it as a real estate plate.
Speaker 3: We said, if you marked the real estate to market
Speaker 3: and added to the cash, it was an eighty dollars Yeah,
Speaker 3: and then when it went to two dollars, We're like, oh,
Speaker 3: too much for our blood. So I do think that
Speaker 3: I'm trying to really learn and think about how can
Speaker 3: I how can I improve results over the next twenty
Speaker 3: years by being more willing to hold? And what does
Speaker 3: that mean in terms of position size? What does it
Speaker 3: mean in terms of volatility? What does it mean in
Speaker 3: terms of client expectation? Would I feel the same if
Speaker 3: a client has twenty five thousand dollars with us that
Speaker 3: I would if it was just my own money, because
Speaker 3: I can absorb a bigger loss and I can absorb
Speaker 3: more volatility. So that's something I'm still trying to process.
Speaker 3: But God, I love the business. And you know, like
Speaker 3: my grandfather, if I could die at my desk at
Speaker 3: a very old age, I am. I do have the
Speaker 3: best job on Earth. I get to study success. I
Speaker 3: get to work with people I admire. I go and
Speaker 3: visit companies to focus on that elusive idea of culture.
Speaker 3: I get to meet the incredible people that have built
Speaker 3: our society, that have built businesses. And we have a
Speaker 3: country that loves to tear down the heroes, you know,
Speaker 3: so we admire the guy on the way up, but
Speaker 3: once they succeed, we somehow decide they're a villain. I
Speaker 3: don't think that's constructive. I think it's a strange thing
Speaker 3: for us to admire athletes and not admire Jeff Bezos
Speaker 3: for what he created and how it has served all
Speaker 3: of us. Every day we all use Amazon and serves us,
Speaker 3: you know, every day we delight in seeing our kids
Speaker 3: on Instagram or using Google Maps. And you know, the
Speaker 3: idea that we continue to vilify our heroes instead of
Speaker 3: judging people by their biggest accomplishment, not their weakest moment.
Speaker 2: Chris, thank you so much for being so generous with
Speaker 2: your time. This has been absolutely delightful. We have been
Speaker 2: speaking with Chris Davis. He is the chairman and portfolio
Speaker 2: manager at Davis Advisors. If you enjoy this conversation, well
Speaker 2: check out any of the six hundred and forty one
Speaker 2: we've done over the past twelve years. You can find
Speaker 2: those at iTunes, Spotify, YouTube, Bloomberg, wherever you get your
Speaker 2: favorite podcasts. I would be remiss if I didn't thank
Speaker 2: the correct team that helps with these conversations together each week.
Speaker 2: Alexis Noriega is my video producer. Joan Russo is my researcher.
Speaker 2: Anna Luke is my podcast producer. Barry Results. You've been
Speaker 2: listening to Master's in Business on Bloomberg Radio.