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Speaker 1: Hello, and welcome to another episode of the Odd Lots Podcast.

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Speaker 1: I'm Joe Wisenthal and I'm Tracy Hallaway, so tricy. You know,

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Speaker 1: we talk a lot about some of the big trends

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Speaker 1: of the last year, talk about housing, talk about various

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Speaker 1: commodities there that are a short supply. We've talked a

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Speaker 1: lot lately about cryptocurrencies. But the other big theme of

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Speaker 1: the last year was just like the incredible power performance

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Speaker 1: of big tech and defined broadly, I mean, it's just

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Speaker 1: an incredible year for huge tech companies in e commerce. Absolutely.

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Speaker 1: It's kind of weird because I'm thinking back to and

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Speaker 1: this was the big story in markets. It was the

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Speaker 1: sort of outperformance of the thing stocks and how everything

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Speaker 1: had just rotated back into these big tech companies. You know,

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Speaker 1: Netflix was doing incredibly well because everyone was sat at

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Speaker 1: home watching movies. There's all this talk about how the

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Speaker 1: COVID crisis had basically re oriented our lives even more

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Speaker 1: towards tech, and now we've come out the other side

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Speaker 1: of it, and there was some talk about the rotation

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Speaker 1: and too value things like that, but I think in general,

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Speaker 1: the big tech stocks have held up remarkably well. Right, Yeah,

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Speaker 1: they're doing really well. I mean the stocks, you know,

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Speaker 1: they maybe they weren't as hot as they were a

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Speaker 1: year ago at the time, but the companies are still

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Speaker 1: doing very well. So, you know, I think even with

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Speaker 1: the quote normalization unquote of the economy, it does not

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Speaker 1: seem like there's some sort of like shift away from tech.

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Speaker 1: And I think there's kind of like two things going on.

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Speaker 1: I mean, one is covid Um, you know, obviously forced

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Speaker 1: certain economic behaviors to go more online, and so you think, okay,

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Speaker 1: Zoom Video a company like that that obviously placed a

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Speaker 1: lot of in person activity. We're talking over Zoom right now.

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Speaker 1: And then the other of thing is, of course this

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Speaker 1: other theme, which is like the sort of great acceleration thesis,

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Speaker 1: which is that all the trends going into the crisis

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Speaker 1: seemed to have just gotten like magnified in five years,

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Speaker 1: got condensed until one year. Yeah, and I think that's

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Speaker 1: probably what we're seeing right now with tech. I mean,

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Speaker 1: this idea that we're all going to go into remote working. Okay,

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Speaker 1: maybe we're not all going to work from home forever,

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Speaker 1: but there might be some sort of hybrid model. We've

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Speaker 1: all gotten very used to ordering stuff off of Amazon.

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Speaker 1: But that said, even though we talk a lot about

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Speaker 1: the acceleration of trends that may be beneficial to tech,

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Speaker 1: there are some things coming up that could potentially be challenging.

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Speaker 1: So you know, for instance, we talk about the bottlenecks,

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Speaker 1: the shortages, what others actually mean for I don't know

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Speaker 1: a company like Uber, right, is it going to be

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Speaker 1: able to get enough drivers? Are we going to see

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Speaker 1: that backlash against big tech from d C. There are

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Speaker 1: certain things coming up that could be problematic exactly right, Well, anyway,

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Speaker 1: I'm very excited about speaking with our guests. We're gonna

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Speaker 1: be speaking with an investor in techs uh, very sort

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Speaker 1: of big picture focused, big ideas, concentrated bets in the space,

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Speaker 1: someone who really sort of like thinks deeply about where

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Speaker 1: it's all going, had some major winners. I'm excited to

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Speaker 1: welcome to odd Lots Ramparts and he is the founder

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Speaker 1: and c i O of Octahedron Capital. Rom thank you

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Speaker 1: so much for joining us. Well, Joe and Tracy, thank

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Speaker 1: you for having me. It's a real pleasure. Yeah, this

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Speaker 1: is super exciting, very excited to talk to you. What

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Speaker 1: do you describe Octahedron because I don't think it's not

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Speaker 1: like the typical fund. I know you have like very

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Speaker 1: big handful of concentrated bets, but what do you describe

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Speaker 1: exactly what is the structure of the fund and your

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Speaker 1: general approach to investing. Thank you Joe for having me.

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Speaker 1: So let me start with a very big picture of

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Speaker 1: the top down, which is, you know what our shitness. So,

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Speaker 1: our our mission is very simple and we simply want

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Speaker 1: to be the absolute best partner for the world's Internet

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Speaker 1: scale businesses. So so what does that mean? So I've

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Speaker 1: been obsessed with this idea of inner scale for almost

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Speaker 1: a decade since I started working after business school at

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Speaker 1: Sanford Bernstein, where my boss and I co founded the

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Speaker 1: Internet team there, and we were quite well known on

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Speaker 1: Wall Street for a couple of years because of very

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Speaker 1: distinctive work on Amazon where we where. We kind of

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Speaker 1: discovered through math in a bunch of our other analysis

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Speaker 1: that hiding inside a five or six percent retail margin

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Speaker 1: business was a thirty percent margin cloud business. We helped

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Speaker 1: defend Google to the transition from desktop to mobile, And

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Speaker 1: what I started realizing was, you know, when when investors

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Speaker 1: started thinking about the traditional offline market, we just have

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Speaker 1: a very narrow definition of TAM, which I have made

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Speaker 1: so many mistakes off in the past, and in fact,

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Speaker 1: one of my biggest mistakes in life is to having

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Speaker 1: narrow definitions. That's number one. Number two is I've started

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Speaker 1: realizing and learning over the last decade that these companies

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Speaker 1: not only get bigger and better over scale, but then

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Speaker 1: they become these humongous they put these humongous revenue scale

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Speaker 1: numbers that an early investor cannot comprehend. And number three,

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Speaker 1: there are niches that are richest in niches that I

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Speaker 1: did not expect. If you think about the Internet being

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Speaker 1: thirty years old, if you think about what is what

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Speaker 1: actually flows through the Internet, even think about net income

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Speaker 1: on Internet companies as a percentage of total global net income,

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Speaker 1: or even you think about what's the total market cap

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Speaker 1: excluding Apple across total global market cap by almost always,

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Speaker 1: you know, we size it to be less than ten percent.

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Speaker 1: And let that sink in for a second. The Internet

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Speaker 1: is ubiquitous, but in almost every way you think about

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Speaker 1: the Internet, less than ten percent of total global value

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Speaker 1: gets accrued to the Internet. So over the next twenty

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Speaker 1: or thirty years, our bet is that whether it's Internet

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Speaker 1: companies so traditional content marketplaces, on demand businesses, or whether

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Speaker 1: it's the stuff that lubricates Internet, which happens to be

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Speaker 1: payments companies and and certain software companies. You know, we

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Speaker 1: think that this convergence of obviously ubiquitous computing, ubiquitous connectivity,

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Speaker 1: now ubiquitous democratization of knowledge, and now post COVID ubiquitous location,

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Speaker 1: we'll get us from that ten to twelve percent range

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Speaker 1: to fifty to sixty in our lifetimes. So the mission is,

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Speaker 1: let's be the best part note of these Internet scale companies,

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Speaker 1: and that's what we do. So I have a lot

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Speaker 1: of questions already, but just on this idea of being

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Speaker 1: the best partner to Internet scale company is possible. My impression,

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Speaker 1: I think a lot of people's impressions of the space

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Speaker 1: is that there is a lot of competition to give

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Speaker 1: capital to the next big thing. So, you know, obviously

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Speaker 1: on the West Coast there's a bunch of people in

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Speaker 1: venture capital who are fighting to find companies to up

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Speaker 1: and coming companies to invest in. How competitive is the

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Speaker 1: space in your mind, and how do you go about

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Speaker 1: differentiating yourself from everyone else? Right, It's it's indeed competitive,

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Speaker 1: and it's just gotten more competitive historically. But this is

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Speaker 1: the way we distinguish ourselves. So number one, you know,

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Speaker 1: Joe mentioned a very important point in the beginning, which

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Speaker 1: is concentration. So as a fund, you know, we believe

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Speaker 1: in essentialism. We try to constantly rank order the best

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Speaker 1: ideas on our risk reward basis publicly and privately, so

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Speaker 1: that forcing function does not allow us to spray and pray.

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Speaker 1: The impact on the private markets is that on average

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Speaker 1: per year, Octahedron makes between i'd say it in two

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Speaker 1: and four investments totally in the private markets. Right. Number two,

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Speaker 1: we are not vcs. We don't take boat seats. We

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Speaker 1: actually co opt with some of the best vcs in

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Speaker 1: the world, who are all many of them whom are

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Speaker 1: investors in Octahedred. And the value that both companies see

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Speaker 1: from a firm like us, which is true native crossover,

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Speaker 1: is that one we don't have twenty different companies to

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Speaker 1: look after. We today we have six private companies. We

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Speaker 1: recently just today invested in a company called Fair whose

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Speaker 1: announcement went out today. What that does for us is

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Speaker 1: we can for every company is very important to us.

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Speaker 1: So what we can do is our emission is to

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Speaker 1: not only help those companies scale into the public markets

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Speaker 1: over the next two to three years, which is kind

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Speaker 1: of our sweet spot. We don't do early state stuff.

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Speaker 1: That's for other vcs and and other board members. But

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Speaker 1: then how do you also stay public or stay successful

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Speaker 1: in the public market. And the average other fund that's

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Speaker 1: competing for capital in the late stage, they are typically

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Speaker 1: trying to build an index of everything going public. So

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Speaker 1: it's what I would categorize a spray and pray approach.

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Speaker 1: And so I would say that just the craft we

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Speaker 1: create around do a few things, do it really well,

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Speaker 1: go really deep, take care of every management team because

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Speaker 1: it is a really important part of a portfolio. Is

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Speaker 1: I think what distinguishes us from from other capital out there,

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Speaker 1: and there are some fantastic companies that are involved in

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Speaker 1: the private markets. But again, you know what I've learned

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Speaker 1: over time is this is not a zero sum game.

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Speaker 1: It's so infinitely large, and it's so infinitely big. There's

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Speaker 1: so many opportunities for everybody. So we're in the business

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Speaker 1: of effectively playing non zero sum games. It's not us

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Speaker 1: worth somebody else, it's us and everybody else. From we

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Speaker 1: talked about this idea of like obviously the last year

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Speaker 1: has been particularly extraordinary, and you put out these presentations

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Speaker 1: of like things you've learned, and you know, I'm curious

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Speaker 1: of what your takeaway for tech is from the last year,

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Speaker 1: Like was last year a period of which our lives

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Speaker 1: temporarily changed? Are their permanent ranges? Like what is what

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Speaker 1: did you think about tech going into the last year,

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Speaker 1: and sort of like what's you what have you learned? Yeah?

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Speaker 1: What have you learned? Yeah? You know, I think this

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Speaker 1: is probably the most tumultus event we've all faced in

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Speaker 1: our lifetimes. And I don't think anybody you know, I

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Speaker 1: launched this fund in April and it was so confusing

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Speaker 1: and dark and that we don't know we were flying blind. Now,

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Speaker 1: I'll be honest that we did not know what was

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Speaker 1: going to happen. In fact, the deck you were referencing

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Speaker 1: called a few things we learned came out of that confusion,

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Speaker 1: because when I started this fund with one analyst in

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Speaker 1: ten million in a u M and we're obviously much

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Speaker 1: bigger now, we were completely confused, like what just happened?

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Speaker 1: And what do we make of this? And you know,

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Speaker 1: all the credit card panel data we buy and the

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Speaker 1: tracking we do of absence downloads and scale. It all went,

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Speaker 1: you know, haywire, right, the numbers are all over the place.

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Speaker 1: We weren't quite sure, and that's how you put it.

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Speaker 1: Put the deck we read, we said, listen, we read

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Speaker 1: a hundred transcripts, so let's put it all together in

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Speaker 1: a format. And the format we just gave it to

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Speaker 1: the world because we figured that if we're facing, if

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Speaker 1: we're so confused, a lot of other people are confused

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Speaker 1: as well. So that's a interesting side note on this.

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Speaker 1: This debt did not happen. It happened completely by by

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Speaker 1: by mistake. So what do we learned? Number one is

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Speaker 1: fully convinced that the world has changed forever in almost

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Speaker 1: every single way. But within that there are nuances, and

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Speaker 1: it will be interesting to see what happens in the

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Speaker 1: next three months when we normalize very difficult calms from

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Speaker 1: last year. Let's talk about the top, which is digital advertising.

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Speaker 1: Digital advertising is now the only way by which retailers

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Speaker 1: and businesses can get ahold of consumers, which is why

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Speaker 1: if you think about twenty one, the numbers have been

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Speaker 1: off the charts, whether it's Google or Amazon, or Facebook

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Speaker 1: or Snapchat or Twitter, or by dance in China. The

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Speaker 1: numbers are just off the charts because how else now

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Speaker 1: people have been quarantined and quiet and staying you know,

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Speaker 1: basically stayed low for an ear, how are you going

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Speaker 1: to acquire and re engage all these buil and some

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Speaker 1: consumers who are not going to be out traveling and

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Speaker 1: partying and eating out and just going about their normal

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Speaker 1: lives and probably having revenged spending over the next you know,

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Speaker 1: twelve months. Well, an obvious winner is digital advertising, and

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Speaker 1: the scale and engagement and tools and the importance to

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Speaker 1: the economy cannot be should not be underestimated. That's number one.

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Speaker 1: Number two the world of SMBs. You know, for the

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Speaker 1: longest time, we've had a thesis. In fact, when we

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Speaker 1: think about investing in Internet scale software, SMB software is

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Speaker 1: right in the bank, in the middle of our wheelhouse.

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Speaker 1: And for the longest time, it was just difficult to

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Speaker 1: invest in SMB in the SMB space, mostly because the mortality,

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Speaker 1: you know, over the last year, it's taken a life

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Speaker 1: of its own. And if you basically break up SMBs

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Speaker 1: by services and non services or retailer or people that

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Speaker 1: sell stuff, we've just seen this explosion of one big

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Speaker 1: picture laws of entrepreneurs and lots of companies being built. Right,

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Speaker 1: the pace of new business formations has been unprecedented, and

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Speaker 1: therefore the use of software, whether it's payment systems like Brecks,

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Speaker 1: or whether it's um you know, supply chain solutions like

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Speaker 1: fair Are, the use of payroll systems like Gusto and Rippling,

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Speaker 1: or you look at software that digitizes retailers like Shopify,

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Speaker 1: has been unprecedented, right because you've got all these companies

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Speaker 1: turning on and they've all been given the same tools

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Speaker 1: that allows them to compete on the same with the

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Speaker 1: same tools and services and products that the largest retailers

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Speaker 1: in the world have. And even better, because digital advertising

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Speaker 1: gets you out of billions of consumers, they have a

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Speaker 1: shot at advertising and getting the consumers with the same

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Speaker 1: level playing field the largest companies in the world have had,

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Speaker 1: which means that this COVID crisis has created this sort

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Speaker 1: of weird equalization mechan some for smb s. Now, it

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Speaker 1: doesn't mean the big companies have been left behind in retail.

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Speaker 1: What we've seen is whether it's Walmart or Target, and

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Speaker 1: there's a really interesting have and have not scenario here.

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Speaker 1: The Walmart's the targets in the world. The Williams Sonomas,

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Speaker 1: the Nikes in the world have taken this crisis and

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Speaker 1: they now have significant material portions of their revenues being

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Speaker 1: implemented via e commerce and all the investments they made

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Speaker 1: historically nique commerce, including innovations and buy online, pickup at shop,

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Speaker 1: curbside pickup, you know, directly integrating with API s like

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Speaker 1: door Dash, bringing on Instacot for local delivery. They just

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Speaker 1: turned everything on a scale and it's just worked wonderfully

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Speaker 1: for them. So you see this have and have not

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Speaker 1: behavior and moving down the stack a little bit with

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Speaker 1: an e commerce again because everyone has focused at time online,

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Speaker 1: we've seen this explosion of alternative shopping mechanisms because I

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Speaker 1: know you mentioned Amazon and the beginning. Amazon is now

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Speaker 1: not the only game in town, and everybody in some

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Speaker 1: ways are gunning for Amazon's market sad now, Amazon itself

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Speaker 1: is doing really well, as you've seen from the numbers,

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Speaker 1: but everyone is gunning for some version of Amazon. So

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Speaker 1: what have we seen. You know, niche vertical marketplaces just

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Speaker 1: scale and do really well and come to a point

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Speaker 1: that Amazon can't really touch them anymore. These are examples

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Speaker 1: are wayfair for example. EXE is a second example, but

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Speaker 1: if you look at the private companies, two companies have

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Speaker 1: been really I've been really intrigued by and I met

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Speaker 1: the management teams last week. It's a company called Curated,

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Speaker 1: and Curated allows you to go and buy higher value

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Speaker 1: items like skis and camping gear and cycles, the stuff

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Speaker 1: you would go to an r I you spend an

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Speaker 1: hother there you have pressure to go buy a bike

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Speaker 1: for yourself. You've probably got twenty bikes on on the

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Speaker 1: rack to choose from, and you've got to go pick

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Speaker 1: it up, pack it and go home, which is kind

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Speaker 1: of a difficult experience. Curated brings that online and I

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Speaker 1: actually used in My wife and I used it last

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Speaker 1: week and it was just a wonderful experience. The other

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Speaker 1: product we the other kind of like niche we see

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Speaker 1: is all sorts of video based shopping, And of course

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Speaker 1: this is a trend that started in China and it's

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Speaker 1: very popular then. But I suspect that lots of video

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Speaker 1: improvements and more more like experiences within apps are going

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Speaker 1: to come to the four and take us away from

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Speaker 1: the boring Amazon experience to a more kind of interactive,

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Speaker 1: fun experience. So a lot of changes happening. And then

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Speaker 1: one last area I want to I want to touch

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Speaker 1: upon is is just on demand and and this is

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Speaker 1: you know, Tracy, you alluded to Uber earlier in the conversation.

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Speaker 1: Will come to that in a bit between Uber and

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Speaker 1: door Dash and possibly to a lower exit instacrat in

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Speaker 1: the US and almost every single company in other parts

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Speaker 1: of the world. I mean, we've these have now become

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Speaker 1: indispensable for many for many people's lives, right. So if

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Speaker 1: you take door Dash for example, theyme just had an

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Speaker 1: unprecedented kind of explosion in their overall bise this over

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Speaker 1: the last twelve months. And what's funny is we tracked

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Speaker 1: the data every week and shockingly it sees there's no

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Speaker 1: evidence of slowdown. Now we do see some slowdown in

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Speaker 1: Uber Eats for example, in a bunch of deeper slowdown

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Speaker 1: and Postmates and a pretty drastic slowdown in in instacast

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Speaker 1: for example. And I can explain that away by a

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Speaker 1: few mechanics. But you know, door Dash by layering on

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Speaker 1: products first, delivering you know, food to you, now, delivering

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Speaker 1: convenience products to you, now, bring on a marketplace with

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Speaker 1: groceries and safely coming on board, they've done a really

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Speaker 1: good job layering on products in the overall ecosystem. But

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Speaker 1: this is a worldwide phenomenon, right whether you see Rappi

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Speaker 1: in Latin America, or Grab in Indonesia and and and

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Speaker 1: Southeast Asia, or Kupang in Korea, on demand systems are

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Speaker 1: here to stay. And and and the reason I bring up

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Speaker 1: on demand is Amazon built this humongous business still growing

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Speaker 1: at unprecedented rates by price selection and convenience, and all

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Speaker 1: these on demand companies are gunning for that convenience part,

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Speaker 1: and Amazon, I think, over the next two to four years,

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Speaker 1: needs to really figure out how they bring that convenience

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Speaker 1: factor down from one day to a few hours. I

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Speaker 1: want to dig into a lot of these different business models.

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Speaker 1: But there's one thing that you said it caught my attention,

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Speaker 1: which is that you launched the new fund in April

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Speaker 1: of last year. Given how you're making concentrated bets, I

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Speaker 1: guess I'm just curious what it was like actually launching

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Speaker 1: the fund at that time period and whether or not

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Speaker 1: I'm not sure how to phrase this, but you know,

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Speaker 1: if you're only investing in six companies, it feels like

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Speaker 1: a lot of pressure, particularly at a time when people

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Speaker 1: were talking about how this was an un precedented crisis.

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Speaker 1: No one really knew what was going to happen. There

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Speaker 1: was a lot of uncertainty about the future. How did

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Speaker 1: you actually go about doing that and deciding on where

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Speaker 1: to place the new money? Yeah, so there were so

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Speaker 1: just to be clear, remember we made six private investments

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Speaker 1: over the last year, So the sixth number was the

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Speaker 1: number of private investments over the last fourteen months. We

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Speaker 1: you know, on the public side, we typically invest between

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Speaker 1: eight and twelve companies at a point in time, and

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Speaker 1: everything is all it's all about risker moorday, point in

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Speaker 1: time and the specific companies. Our business model, Tracy, is

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Speaker 1: very different compared to the average fund where in the

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Speaker 1: average one I worked in, so the average one I

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Speaker 1: know of, you tend to become what I got an

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Speaker 1: analyst of the week. So you've got to pitch ideas

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Speaker 1: every couple of weeks and then you pitch it to

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Speaker 1: your PM and hopefully goes to your book. We have

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Speaker 1: a we have taken the opposite business model is something

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Speaker 1: I've learned that ultimate where I lost prior to this.

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Speaker 1: As a firm, we only cover between forty and sixties

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Speaker 1: stocks and I have an analyst team of four or

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Speaker 1: people now and every analyst covers between twelve, let's saving

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Speaker 1: ten and twelve stocks. How do we pick these stocks?

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Speaker 1: Because that's a collective knowledge of you know, four or

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Speaker 1: five of us who between us have you know, fourty

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Speaker 1: years of thirty years of experience, right, so we kind

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Speaker 1: of know where the world is going to and the

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Speaker 1: expectation per analysts is to become amongst the world's best

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Speaker 1: analysts in those ten or twelve stocks. And we have

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Speaker 1: a very kind of like common format and the way

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Speaker 1: we we we we think about our driver trees, the

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Speaker 1: way we build our models that we we think about

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Speaker 1: valuation and so as the PM my analyst team makes

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Speaker 1: it really easy for me to pick and choose between

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Speaker 1: companies based on the risk reward at a point in time.

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Speaker 1: But I'll tell you last year in April was a

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Speaker 1: difficult time, and it was very difficult, mostly because that

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Speaker 1: markets have I remember trufed on March twenty three, and

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Speaker 1: by the time we got dollars in our TB account

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Speaker 1: on April fifteen, the markets had rallied almost thty one

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Speaker 1: if I'm not mistaken. It was just tough, guys, because

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Speaker 1: you know, that my favorite companies were ten by the

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Speaker 1: time I even got my first dollar. So luckily for us,

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Speaker 1: there was no pressure from our LPs who to go

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Speaker 1: deploy capital immediately, so we could take almost a month

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Speaker 1: to slowly deploy dollars one, you know, one by one

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Speaker 1: by one. There was no reason to go put all

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Speaker 1: our money, you know, at one goal into the market,

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Speaker 1: so we took our time and I think we kind

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Speaker 1: of like led our way in over almost two months,

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Speaker 1: and then by June, when we got so much more

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Speaker 1: clarity about the world, we were able to kind of, um,

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Speaker 1: you know, be fully invested. Of course, this is not

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Speaker 1: a static game because you know, we we we raised

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Speaker 1: money pretty rapidly through the crisis, and today we're you know,

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Speaker 1: we're getting close to two million dollars in a u M.

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Speaker 1: So the hard part is, you know, how do you

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Speaker 1: keep up? Right? So there were the challenges were Number one,

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Speaker 1: there were three or four moving parts. One is the

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Speaker 1: markets were moving and there was no way any of

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Speaker 1: us could have even anticipated the multiple expression that happened

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Speaker 1: last year. Right, these companies were just beating numbers by

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Speaker 1: epic proportions, like the world changed so rapidly. Even they

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Speaker 1: were not able to keep up. And you mentioned a

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Speaker 1: little about you know, the you know, the the challenges

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Speaker 1: with acquiring supply for Uber, but all that was true.

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Speaker 1: So Uber had a demand problem first. Now we have

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Speaker 1: a supply problem, but it will all eventually, you know,

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Speaker 1: be good for them. And once once the demand and

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Speaker 1: supply work, Uber is gonna be an explosive stock in

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Speaker 1: my opinion. But number three, you know, we were raising capital,

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Speaker 1: so each time money came maybe we were like, man,

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Speaker 1: we have all those new capital, what do we do

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Speaker 1: with it? So it wasn't easy. You know, anybody who

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Speaker 1: tells you starting a fund as easy as obviously you know,

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Speaker 1: it's too optimistic in life. But we had it particularly hard.

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Speaker 1: So I'm actually quite grateful that we kind of made

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Speaker 1: our way through the process. But by June and July

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Speaker 1: and we finally got up footing when we knew what

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Speaker 1: we wanted to own, we kind of realized that the

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Speaker 1: numbers were going to be much bigger than what we

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Speaker 1: originally modeled, you know, three or four months ago when

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Speaker 1: we they were in a free launch phase, we were

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Speaker 1: able to play the game better. And then of course

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Speaker 1: the hot part last year was I think in the

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Speaker 1: month of November, the month of August, we had, you know,

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Speaker 1: pretty gnarly corrections and the NAZA because that happens in

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Speaker 1: a bullmarket as well, you know. But you know, nine

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Speaker 1: months in, you know, by the end of the year,

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Speaker 1: I felt like we were we were in a good

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Speaker 1: place and we kind of knew we were seeing the

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Speaker 1: ball big and we were able to take some big

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Speaker 1: bet So, you know, between legging in, being slow, being careful,

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Speaker 1: not being greedy immediately, and frankly just not getting formed out,

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Speaker 1: I think that's how we survived the year one. So

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Speaker 1: from you mentioned high valuations there, and this is the

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Speaker 1: thing that comes up consistently with tech investments. You know,

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Speaker 1: people like Amazon, people like Uber, but maybe they don't

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Speaker 1: like it at the current multiples. How do you get

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Speaker 1: comfortable with those in the tech world and how are

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Speaker 1: you thinking about them? Yeah, so you know, every quarter

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Speaker 1: we put up we have an Internal Growth Index of

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Speaker 1: Software and Internal Growth Index of of Internet, which we

432
00:23:52,760 --> 00:23:56,760
Speaker 1: published a few days ago. So number one, I would

433
00:23:56,760 --> 00:23:59,840
Speaker 1: actually argue that companies like Uber and Amazon are actually

434
00:24:00,040 --> 00:24:03,360
Speaker 1: sold really cheap. They're actually very cheap. This is good,

435
00:24:03,359 --> 00:24:07,280
Speaker 1: I want to hear, yes, So so let me broadly

436
00:24:07,280 --> 00:24:10,080
Speaker 1: break it up right now, so so ignore the peaks.

437
00:24:10,080 --> 00:24:12,000
Speaker 1: So so first of all, right, next level set here.

438
00:24:12,440 --> 00:24:16,840
Speaker 1: Stocks in general are very expensive, right, there's no easy

439
00:24:16,960 --> 00:24:19,440
Speaker 1: deal available in the market right now. But I think

440
00:24:19,560 --> 00:24:23,040
Speaker 1: some stocks are incredibly cheap, but not everything is expensive.

441
00:24:23,040 --> 00:24:24,720
Speaker 1: So let's just break it because LPs asked me this

442
00:24:24,760 --> 00:24:28,600
Speaker 1: all the time. So number one, let's talk about software today.

443
00:24:29,000 --> 00:24:32,000
Speaker 1: Software today, you know high growth software our index and

444
00:24:32,040 --> 00:24:34,159
Speaker 1: you know trust me on our index, but you know

445
00:24:34,200 --> 00:24:37,160
Speaker 1: it trades at twenty times revenues, right, and the historical

446
00:24:37,280 --> 00:24:40,440
Speaker 1: five year mein was was eleven times, and the pre

447
00:24:40,560 --> 00:24:44,720
Speaker 1: COVID number was like fifteen times. So it's even though

448
00:24:44,760 --> 00:24:47,960
Speaker 1: we've had a software correction, the reality is that there

449
00:24:48,000 --> 00:24:50,240
Speaker 1: are great companies like slow Flake out that in great

450
00:24:50,240 --> 00:24:53,320
Speaker 1: companies like CrowdStrike. But it's very hard to underwrite companies

451
00:24:53,359 --> 00:24:55,439
Speaker 1: to fifty times for revenues. You have to take a

452
00:24:55,560 --> 00:24:58,399
Speaker 1: very very long view. So there are still some companies

453
00:24:58,440 --> 00:25:02,040
Speaker 1: that's que the average a pretty epic fashion. But it's

454
00:25:02,080 --> 00:25:04,360
Speaker 1: software is not cheap by any definition. And now we're

455
00:25:04,359 --> 00:25:07,840
Speaker 1: actually quite nervous on software. We only own two software stocks,

456
00:25:07,840 --> 00:25:12,639
Speaker 1: but generally software is really expensive. Then second, we have

457
00:25:12,720 --> 00:25:16,600
Speaker 1: payments payments, same story there. Payments is a new software

458
00:25:16,680 --> 00:25:19,439
Speaker 1: and in fact that there's probably even higher kind of

459
00:25:19,480 --> 00:25:23,320
Speaker 1: like crazy evaluations happening in payments market. I just went

460
00:25:23,359 --> 00:25:26,040
Speaker 1: out a couple of days ago and that was most bleed,

461
00:25:26,119 --> 00:25:28,360
Speaker 1: and and the local went out a few days ago

462
00:25:28,440 --> 00:25:31,480
Speaker 1: and that was expensive. But they're all phenomenal companies, and

463
00:25:31,560 --> 00:25:34,200
Speaker 1: the Local especially as I think, doing an exceptional job.

464
00:25:34,680 --> 00:25:37,360
Speaker 1: So those are the two. So again, within software and payments,

465
00:25:37,359 --> 00:25:41,280
Speaker 1: we're very careful. We only own Zoom and Twilio in

466
00:25:41,280 --> 00:25:43,119
Speaker 1: in in software and we can talk a little bit

467
00:25:43,119 --> 00:25:46,560
Speaker 1: more about that, but in and in payments we own

468
00:25:46,600 --> 00:25:49,719
Speaker 1: smaller positions. But when it comes to Internet, you know

469
00:25:49,920 --> 00:25:52,840
Speaker 1: I want to I'm gonna push back on valuation. So

470
00:25:52,920 --> 00:25:55,879
Speaker 1: first of all, right, you talk about software being valued

471
00:25:55,920 --> 00:25:59,520
Speaker 1: on a net revenue basis, you know Internet. Our framework

472
00:25:59,600 --> 00:26:02,000
Speaker 1: is we we for every company we cover, we have

473
00:26:02,160 --> 00:26:05,479
Speaker 1: a view on what we think long term EBITDA looks like,

474
00:26:05,840 --> 00:26:08,720
Speaker 1: and we build an index around it. It turns out

475
00:26:08,720 --> 00:26:12,120
Speaker 1: that you know, at thirty one times long term EBITDA

476
00:26:12,200 --> 00:26:15,240
Speaker 1: and our index, it's it's it's expensive compared to the

477
00:26:15,280 --> 00:26:17,760
Speaker 1: five year medium, but the five year median for that

478
00:26:17,920 --> 00:26:20,760
Speaker 1: was twenty three, so you're eight or nine terms about

479
00:26:20,840 --> 00:26:23,000
Speaker 1: what that is. But that is cute by companies like

480
00:26:23,000 --> 00:26:26,560
Speaker 1: like Airbnb, for example. But if you take internet companies

481
00:26:27,520 --> 00:26:31,280
Speaker 1: at the very bottom, the megacaps, whether it's Facebook, whether

482
00:26:31,320 --> 00:26:34,560
Speaker 1: it's Google, whether it's Ali Baba and Amazon, they're not

483
00:26:34,640 --> 00:26:38,600
Speaker 1: just cheap. In some cases, they are ridiculously cheap. And

484
00:26:38,640 --> 00:26:41,240
Speaker 1: all Chinese companies are cheap right now. So China is

485
00:26:41,280 --> 00:26:43,919
Speaker 1: a big focus for us. We own both shares and

486
00:26:44,040 --> 00:26:47,200
Speaker 1: buy Dance and shares in Bindodo and shares in ali

487
00:26:47,240 --> 00:26:50,879
Speaker 1: Baba in size because those stocks have beaten down not

488
00:26:51,000 --> 00:26:54,640
Speaker 1: on fundamentals but on overall you know, worries on regulation.

489
00:26:55,359 --> 00:26:57,560
Speaker 1: You take the next leg up, which is the large

490
00:26:57,560 --> 00:27:02,240
Speaker 1: and megacap internet companies face a Google, Amazon, Those companies

491
00:27:02,240 --> 00:27:04,760
Speaker 1: are going to grow, not at twenty percent for a

492
00:27:04,880 --> 00:27:08,120
Speaker 1: very long time, and this year it's gonna be it's

493
00:27:08,119 --> 00:27:11,439
Speaker 1: probably the best year for advertising in the history of

494
00:27:11,480 --> 00:27:14,720
Speaker 1: me covering these stalks. Why because the entire world is

495
00:27:14,760 --> 00:27:17,360
Speaker 1: coming online again and they have to go and acquire

496
00:27:17,400 --> 00:27:20,760
Speaker 1: customers on Facebook and Google and Snapchat and Twitter. There's

497
00:27:20,760 --> 00:27:23,159
Speaker 1: no other choice. Right where else do you go? So

498
00:27:23,240 --> 00:27:26,800
Speaker 1: those stalks look extraordinarily cheap and and Google. You know,

499
00:27:26,800 --> 00:27:28,919
Speaker 1: we own a pretty large position in Google, and the

500
00:27:28,920 --> 00:27:31,800
Speaker 1: reason for that is because they have multiple ways to win,

501
00:27:31,880 --> 00:27:35,560
Speaker 1: including search, which is doing really well, turning on ads

502
00:27:35,560 --> 00:27:39,520
Speaker 1: and maps, YouTube is absolutely killing numbers. And oh, by

503
00:27:39,560 --> 00:27:42,920
Speaker 1: the way, after Thomas Curran took over Google Cloud two

504
00:27:43,000 --> 00:27:46,760
Speaker 1: years ago, he's done an a plus job in restructuring

505
00:27:46,800 --> 00:27:49,320
Speaker 1: the cloud business and go to market and sales. So

506
00:27:49,359 --> 00:27:53,080
Speaker 1: we're seeing evidence of real sales, motion, and and wins

507
00:27:53,119 --> 00:27:55,800
Speaker 1: in the cloud business. So many ways to win at Google,

508
00:27:55,880 --> 00:27:59,000
Speaker 1: especially the third stack on top of that is you know,

509
00:27:59,160 --> 00:28:03,520
Speaker 1: single name Internet companies or those are expensive, so we

510
00:28:03,560 --> 00:28:06,800
Speaker 1: own smaller positions in those like for example, you take

511
00:28:06,800 --> 00:28:11,240
Speaker 1: a company like Carvana, phenomenal acid slightly expensive, will grow

512
00:28:11,320 --> 00:28:15,040
Speaker 1: fast this year, probably beat numbers. But within this category

513
00:28:15,080 --> 00:28:17,480
Speaker 1: you've got some very cheap companies. And one of our

514
00:28:17,520 --> 00:28:22,200
Speaker 1: biggest positions is Peloton. Right, So the opportunity in Internet

515
00:28:22,480 --> 00:28:25,159
Speaker 1: is very simple to me, just like zoom in the

516
00:28:25,200 --> 00:28:28,520
Speaker 1: public markets in software, where people have basically assume that

517
00:28:28,640 --> 00:28:32,399
Speaker 1: once COVID goes away, we'll all return to normal. People

518
00:28:32,440 --> 00:28:35,160
Speaker 1: have beaten down the stalks of Peloton because hey, you'll

519
00:28:35,160 --> 00:28:37,320
Speaker 1: all go back to the gym, and people have beaten

520
00:28:37,359 --> 00:28:40,000
Speaker 1: down the stalks of others because any think the world

521
00:28:40,040 --> 00:28:42,200
Speaker 1: will recover and nobody's going to go and buy stuff

522
00:28:42,200 --> 00:28:45,440
Speaker 1: on Amazon anymore. That does not make sense. And so

523
00:28:45,520 --> 00:28:47,160
Speaker 1: my point is, as you go up the staff to

524
00:28:47,240 --> 00:28:50,880
Speaker 1: smaller companies, there are pockets of overvaluation for sure, and

525
00:28:50,920 --> 00:28:54,520
Speaker 1: some some companies are not cheap, like Airbnb, for example,

526
00:28:55,000 --> 00:28:58,040
Speaker 1: But in almost every other case, Internet stocks have real

527
00:28:58,200 --> 00:29:01,680
Speaker 1: value today. So let me stop there. I'm curious like

528
00:29:02,000 --> 00:29:04,000
Speaker 1: time frame. I mean, you know, you mentioned that there

529
00:29:04,000 --> 00:29:07,240
Speaker 1: were a few tech draw downs over the last year.

530
00:29:08,520 --> 00:29:11,360
Speaker 1: Uh for several months several parts of this year, there

531
00:29:11,400 --> 00:29:15,120
Speaker 1: did seem to be some sort of compression in some

532
00:29:15,200 --> 00:29:18,760
Speaker 1: of the tech valuations. Is the reopening happened? What do

533
00:29:18,800 --> 00:29:23,320
Speaker 1: you do you think about sort of like macro conditions

534
00:29:23,400 --> 00:29:26,040
Speaker 1: that will cause either people to rotate in or out

535
00:29:26,080 --> 00:29:28,479
Speaker 1: of tech or is it still just you're focused on

536
00:29:28,520 --> 00:29:31,040
Speaker 1: tech and you can't do anything about the sort of

537
00:29:31,080 --> 00:29:34,720
Speaker 1: the broader macro. So listen, I mean, I'm not a

538
00:29:34,800 --> 00:29:38,360
Speaker 1: macro person, but you know, it's foolish to say that

539
00:29:38,400 --> 00:29:43,120
Speaker 1: we are not keenly aware and keenly understand. You know,

540
00:29:43,240 --> 00:29:47,040
Speaker 1: macro that could hurt our companies, right, So we keep

541
00:29:47,080 --> 00:29:50,000
Speaker 1: an eye on Macro, but we don't treat other companies

542
00:29:50,000 --> 00:29:53,120
Speaker 1: on the back of Macro. The reality is that these

543
00:29:53,160 --> 00:29:57,000
Speaker 1: companies will grow earnings between twenty and twenty five maybe

544
00:29:58,160 --> 00:30:01,120
Speaker 1: for the next decade. Right. So on the one hand,

545
00:30:01,440 --> 00:30:03,680
Speaker 1: we can kind of sleep well by the fact that

546
00:30:03,720 --> 00:30:06,200
Speaker 1: if we just went on vacation for two years and

547
00:30:06,320 --> 00:30:10,120
Speaker 1: all this Macro and this long shot term correction went away,

548
00:30:10,520 --> 00:30:12,840
Speaker 1: we'd come back and these companies would be, you know,

549
00:30:13,200 --> 00:30:15,360
Speaker 1: two times the size that they were we left them, right,

550
00:30:15,800 --> 00:30:18,680
Speaker 1: So we can, luckily, you know, when you invest in

551
00:30:18,720 --> 00:30:21,840
Speaker 1: and the only invest in secular growth businesses, we kind

552
00:30:21,840 --> 00:30:24,920
Speaker 1: of have that real deep safety net that if we

553
00:30:24,960 --> 00:30:27,000
Speaker 1: did nothing and we were just foolish, right and we

554
00:30:27,120 --> 00:30:29,760
Speaker 1: just invested, you know, you know, two or three years out,

555
00:30:29,800 --> 00:30:32,120
Speaker 1: these companies are going to be far larger business than

556
00:30:32,400 --> 00:30:34,840
Speaker 1: than they are today. The only thing we don't we

557
00:30:34,840 --> 00:30:37,200
Speaker 1: should not do and be careful of, is we should

558
00:30:37,200 --> 00:30:41,040
Speaker 1: not be greedy and get overly fue mode to chase

559
00:30:41,120 --> 00:30:45,080
Speaker 1: momentum and pay any price. But when you pay and

560
00:30:45,080 --> 00:30:47,640
Speaker 1: and we're very lucky at this point in time thanks

561
00:30:47,640 --> 00:30:49,800
Speaker 1: to the correction in January, and then the correction in

562
00:30:49,880 --> 00:30:52,480
Speaker 1: March and the deep correction in May, and I'm sure

563
00:30:52,480 --> 00:30:55,280
Speaker 1: our correction is going to happen again sometime soon. All

564
00:30:55,360 --> 00:30:57,040
Speaker 1: we have to do is make sure that we served

565
00:30:57,080 --> 00:31:00,480
Speaker 1: the way reasonably well and use these pockets of pain

566
00:31:01,000 --> 00:31:04,840
Speaker 1: to um you know, start keep collecting our favorite assets,

567
00:31:05,240 --> 00:31:08,000
Speaker 1: and also make sure that when we have short term

568
00:31:08,000 --> 00:31:10,800
Speaker 1: euphoric moments like we had got two weeks ago, and

569
00:31:10,840 --> 00:31:13,040
Speaker 1: then you know, in the month of February, we are

570
00:31:13,120 --> 00:31:17,480
Speaker 1: appropriately sober. So there are two the worlds of thought here.

571
00:31:17,880 --> 00:31:19,920
Speaker 1: The one world of thought is just put money to

572
00:31:19,960 --> 00:31:22,200
Speaker 1: work and we'll all be fine on the long term.

573
00:31:22,600 --> 00:31:25,640
Speaker 1: The second worldview is, you know, because we do such

574
00:31:25,680 --> 00:31:27,760
Speaker 1: few things and we're actually quite good at these stalks,

575
00:31:28,160 --> 00:31:30,680
Speaker 1: we should be able to do risk management on a

576
00:31:30,760 --> 00:31:35,320
Speaker 1: purst talk basis better than most people. So our strategy

577
00:31:35,320 --> 00:31:39,320
Speaker 1: and philosophy is when stocks are getting paid two or

578
00:31:39,360 --> 00:31:42,040
Speaker 1: three years in advance, we should not be greedy. We

579
00:31:42,080 --> 00:31:44,920
Speaker 1: should take some risk of the table because the market

580
00:31:45,040 --> 00:31:47,800
Speaker 1: we're actually very happy. So I'll tell you a dirty secret.

581
00:31:48,080 --> 00:31:50,280
Speaker 1: Last year was a phenomenal year for us, and we're

582
00:31:50,360 --> 00:31:53,840
Speaker 1: very lucky. We launched in despite a difficult start. The

583
00:31:53,920 --> 00:31:57,960
Speaker 1: reality is, all through last year, I was struggling, and

584
00:31:58,000 --> 00:32:00,160
Speaker 1: I was struggling because each time I thought something was

585
00:32:00,200 --> 00:32:02,760
Speaker 1: too expensive, it kept going ahead of me. So we

586
00:32:02,800 --> 00:32:05,760
Speaker 1: were constantly felt prefer to tase momentum and we did not.

587
00:32:05,880 --> 00:32:08,280
Speaker 1: But there was always the spain that man, we just

588
00:32:08,320 --> 00:32:12,600
Speaker 1: missed it again. This year, while obviously we're still you know,

589
00:32:12,400 --> 00:32:14,320
Speaker 1: you know, thankfully we're doing quite well for the year,

590
00:32:15,280 --> 00:32:19,200
Speaker 1: the reality is this feels like more of a normal year,

591
00:32:19,240 --> 00:32:21,000
Speaker 1: but with more punches in your face, if you know

592
00:32:21,040 --> 00:32:24,720
Speaker 1: what I mean. So at least this year, we we

593
00:32:24,800 --> 00:32:27,760
Speaker 1: have shots to take to buy good assets at at

594
00:32:27,840 --> 00:32:31,480
Speaker 1: the risk prices number one, if you believe it again,

595
00:32:31,520 --> 00:32:33,800
Speaker 1: all our stocks we have a variant perception on our

596
00:32:33,880 --> 00:32:36,560
Speaker 1: numbers looking out three years and for the quarter and

597
00:32:36,640 --> 00:32:39,800
Speaker 1: for the year. But on the other hand, you know,

598
00:32:39,880 --> 00:32:42,000
Speaker 1: we have shots to take risk of the table. So

599
00:32:42,320 --> 00:32:44,080
Speaker 1: this is going to be an ear where I think

600
00:32:44,120 --> 00:32:48,080
Speaker 1: we served the wave versus trying to be heroes. So

601
00:32:48,160 --> 00:32:50,479
Speaker 1: I would say that coming out and I think the

602
00:32:50,520 --> 00:32:52,719
Speaker 1: next three months Joe and Tracy are going to be

603
00:32:53,360 --> 00:32:57,480
Speaker 1: particularly hard because we are going into high inflation months

604
00:32:57,520 --> 00:33:00,320
Speaker 1: with easy calms over the last last year, and we

605
00:33:00,360 --> 00:33:02,440
Speaker 1: are going into the peak of there's will be a

606
00:33:02,480 --> 00:33:05,840
Speaker 1: lot of tension about Hey, you know, yes we believe

607
00:33:05,920 --> 00:33:08,160
Speaker 1: so the world still thinks many of these companies are

608
00:33:08,200 --> 00:33:10,880
Speaker 1: screwed completely because we're all going to go back to

609
00:33:10,880 --> 00:33:13,880
Speaker 1: our normal lives. We have a view that these are

610
00:33:14,080 --> 00:33:17,400
Speaker 1: far more durable than the market expects. But this is

611
00:33:17,400 --> 00:33:19,440
Speaker 1: going to be the quarter, maybe the next six months

612
00:33:19,440 --> 00:33:23,520
Speaker 1: where companies have to prove themselves. And when you have this, uh,

613
00:33:23,600 --> 00:33:26,280
Speaker 1: this tension, it's going to be tough for growth stocks,

614
00:33:26,280 --> 00:33:43,479
Speaker 1: and we are very much prepared for it. So you

615
00:33:43,520 --> 00:33:45,880
Speaker 1: mentioned earlier this idea that one of the things that

616
00:33:45,920 --> 00:33:49,480
Speaker 1: happened over the past year is a bunch of companies

617
00:33:49,560 --> 00:33:53,800
Speaker 1: sort of upped their technological game. I guess you mentioned,

618
00:33:53,880 --> 00:33:56,240
Speaker 1: you know, the example of Nike and some other retailers

619
00:33:56,360 --> 00:33:59,560
Speaker 1: who are now much more savvy about the way they're

620
00:33:59,560 --> 00:34:02,520
Speaker 1: selling on the internet and how they're advertising and things

621
00:34:02,560 --> 00:34:06,960
Speaker 1: like that. How do you differentiate between a pure tech

622
00:34:07,080 --> 00:34:12,759
Speaker 1: company versus a retailer who happens to do tech well,

623
00:34:13,520 --> 00:34:16,759
Speaker 1: and is there room in your fund for both of

624
00:34:16,800 --> 00:34:20,200
Speaker 1: those or do you try to identify pure tech companies

625
00:34:20,280 --> 00:34:23,080
Speaker 1: who are able to leverage off of the way the

626
00:34:23,120 --> 00:34:27,640
Speaker 1: broader market or the broader business world is actually deploying technology.

627
00:34:27,680 --> 00:34:30,680
Speaker 1: If that makes sense. You know, we are I would

628
00:34:30,680 --> 00:34:34,520
Speaker 1: call myself on ourselves, we're very focused on technology, but

629
00:34:34,560 --> 00:34:37,000
Speaker 1: I wouldn't say that we we don't have this narrow minded,

630
00:34:37,080 --> 00:34:41,480
Speaker 1: arrogant view that brands and distribution don't make sense. Like

631
00:34:41,600 --> 00:34:45,560
Speaker 1: Nike is a phenomenal asset, right and they have been

632
00:34:45,600 --> 00:34:50,640
Speaker 1: able to pivot into a technologically superior focused way, And

633
00:34:50,840 --> 00:34:53,680
Speaker 1: companies and and and consumers love buying stuff on Nike

634
00:34:53,800 --> 00:34:56,640
Speaker 1: dot com. The same thing is through for Williams Sonoma,

635
00:34:56,680 --> 00:34:59,880
Speaker 1: for example. So you know this is a constantential should

636
00:34:59,880 --> 00:35:04,239
Speaker 1: be increase our coverage to encompase those companies. So for now,

637
00:35:04,280 --> 00:35:06,200
Speaker 1: what we're doing is, again we are a young firm.

638
00:35:06,480 --> 00:35:09,600
Speaker 1: We keep an eye. But if for example, e commerce

639
00:35:09,600 --> 00:35:13,040
Speaker 1: becomes thirty or forty percent of total Nike sales or

640
00:35:13,080 --> 00:35:15,879
Speaker 1: seventy percent of Nike sales over time, once we get

641
00:35:15,880 --> 00:35:19,080
Speaker 1: to that, you know, high thirties, high forties levels, you

642
00:35:19,120 --> 00:35:21,400
Speaker 1: can be pretty sure we'll be covering those assets. Because

643
00:35:21,680 --> 00:35:25,240
Speaker 1: when it comes to e commerce in in particular, there's

644
00:35:25,280 --> 00:35:29,560
Speaker 1: nothing called an e commerce company anymore. Everything will become

645
00:35:29,680 --> 00:35:33,400
Speaker 1: a form of omni channel, right. So who would have

646
00:35:33,400 --> 00:35:35,800
Speaker 1: thought that Amazon bought Whole Foods and then Whole Foods

647
00:35:35,800 --> 00:35:39,600
Speaker 1: makes it an omnichannel retailer, right, and so on and

648
00:35:39,640 --> 00:35:42,600
Speaker 1: so for the wayfarn has opened up stores, Peloton is

649
00:35:42,640 --> 00:35:46,040
Speaker 1: omnichannel from the get go. Apple is omnichannel from the

650
00:35:46,080 --> 00:35:48,759
Speaker 1: get go. They've got stores all over the world. And

651
00:35:48,840 --> 00:35:53,680
Speaker 1: so this idea of a pure play internet commerce company

652
00:35:53,800 --> 00:35:56,520
Speaker 1: in the in the next decade may not necessarily be

653
00:35:56,520 --> 00:35:58,960
Speaker 1: true because at the end they're selling to humans and

654
00:35:59,080 --> 00:36:02,960
Speaker 1: humans want it from experiences. Now, the trend that is

655
00:36:03,000 --> 00:36:06,000
Speaker 1: I'm super excited about is the point you alluded to.

656
00:36:06,480 --> 00:36:08,839
Speaker 1: You have a company like Nike, which is I think

657
00:36:08,880 --> 00:36:12,080
Speaker 1: best to breed very forward looking, great technology team. They

658
00:36:12,120 --> 00:36:15,600
Speaker 1: may not be able to compete with Amazon on tech

659
00:36:15,719 --> 00:36:19,160
Speaker 1: per se, but what we have is a bunch of

660
00:36:19,200 --> 00:36:24,000
Speaker 1: software companies that are building the intelligence components that enable

661
00:36:24,160 --> 00:36:27,920
Speaker 1: the real world American international economy to compete with the

662
00:36:27,960 --> 00:36:30,640
Speaker 1: tech giants. And one of those companies, for example, is

663
00:36:30,719 --> 00:36:35,080
Speaker 1: data Bricks right. Data Bricks provides a machine learning components

664
00:36:35,080 --> 00:36:39,480
Speaker 1: and machine learning intelligence previously the purview only of Facebook

665
00:36:39,520 --> 00:36:42,880
Speaker 1: and Google and Amazon and Uber and bringing it to

666
00:36:42,920 --> 00:36:47,040
Speaker 1: the mass market, and so under underneath the surface of

667
00:36:47,040 --> 00:36:49,520
Speaker 1: these companies, as long as they have the will to

668
00:36:49,600 --> 00:36:53,520
Speaker 1: become online first or our our online becoming an important component.

669
00:36:53,840 --> 00:36:57,280
Speaker 1: There are so many digital tools and software that provide

670
00:36:57,320 --> 00:37:01,120
Speaker 1: these companies the tool kit and the libraries and the

671
00:37:01,200 --> 00:37:06,879
Speaker 1: lego building blocks to potentially compete with their online first contemporaries.

672
00:37:07,360 --> 00:37:10,000
Speaker 1: So this gets to a question, and you know, Tracy

673
00:37:10,080 --> 00:37:14,799
Speaker 1: said at the beginning, you know there's always um concerns

674
00:37:14,880 --> 00:37:21,440
Speaker 1: antitrust regulation. What is your view on setting aside the

675
00:37:21,440 --> 00:37:25,960
Speaker 1: regulatory concerns per se, Like, how guaranteed is it that

676
00:37:26,080 --> 00:37:29,239
Speaker 1: the Facebook's amazons and alphabets of the world will still

677
00:37:29,280 --> 00:37:32,160
Speaker 1: be the most dominant companies in the world, didn't say

678
00:37:32,160 --> 00:37:34,919
Speaker 1: five or ten years? Or could it be that over

679
00:37:35,040 --> 00:37:37,880
Speaker 1: time some of the expertise they have does get distributed

680
00:37:37,960 --> 00:37:42,600
Speaker 1: like you described, and that that mode that they have, however,

681
00:37:42,640 --> 00:37:47,440
Speaker 1: it is, starts to meaningfully get eroded. So every company,

682
00:37:47,560 --> 00:37:50,239
Speaker 1: whether it's big or small, should and thus live in

683
00:37:50,239 --> 00:37:53,160
Speaker 1: a healthy state of paranoia. Now, so again, there are

684
00:37:53,160 --> 00:37:56,080
Speaker 1: many ways to answer this question. Number one is, let's

685
00:37:56,080 --> 00:38:00,759
Speaker 1: take Google. I think Google is you know, it's just

686
00:38:01,480 --> 00:38:04,920
Speaker 1: inconquerable in many ways. It's impossible. It's it's gonna be

687
00:38:05,120 --> 00:38:08,640
Speaker 1: very very hard to get a replacement for traditional search.

688
00:38:08,719 --> 00:38:12,520
Speaker 1: So I think core search and core YouTube has just

689
00:38:12,719 --> 00:38:15,040
Speaker 1: under the twenty years to go, and I don't see

690
00:38:15,040 --> 00:38:19,319
Speaker 1: how there's any replacement for it anytime soon. Okay, and

691
00:38:19,400 --> 00:38:22,920
Speaker 1: maybe YouTube has replacements with TikTok and Facebook videos and

692
00:38:22,960 --> 00:38:27,040
Speaker 1: other things, but very hard to replace it. Amazon was

693
00:38:27,080 --> 00:38:29,600
Speaker 1: never going to be a monopoly anyway, So this idea

694
00:38:29,680 --> 00:38:33,040
Speaker 1: of monopolies winning to the one true monopoly I think

695
00:38:33,120 --> 00:38:36,719
Speaker 1: is Google and potentially Facebook, But which so which is

696
00:38:36,719 --> 00:38:40,320
Speaker 1: why they are always the cross as of antitrust. Amazon

697
00:38:40,800 --> 00:38:43,800
Speaker 1: was never a monopoly right even today, if you compare

698
00:38:43,840 --> 00:38:46,600
Speaker 1: it to the total overall retail market, there's still a

699
00:38:46,640 --> 00:38:50,120
Speaker 1: small fraction and there are many people attacking their lunch.

700
00:38:50,120 --> 00:38:54,360
Speaker 1: So I think Amazon it's not vulnerable, But the reality

701
00:38:54,480 --> 00:38:57,080
Speaker 1: is that everyone will start shipping away at pieces. But

702
00:38:57,120 --> 00:38:58,960
Speaker 1: again this goes back to my point at the beginning.

703
00:38:59,280 --> 00:39:01,800
Speaker 1: If you think of the world or the Internet world,

704
00:39:01,840 --> 00:39:05,839
Speaker 1: I say zero sum game with market share fights, then

705
00:39:05,840 --> 00:39:08,600
Speaker 1: of course Amazon on the threat. In fact, I would

706
00:39:08,640 --> 00:39:11,000
Speaker 1: argue that take any company in the world, the market

707
00:39:11,000 --> 00:39:14,480
Speaker 1: share dominant company, the market share always goes down. Amazon's

708
00:39:14,480 --> 00:39:17,280
Speaker 1: market share will go down because Wayfare is growing faster

709
00:39:17,320 --> 00:39:21,000
Speaker 1: than Amazon, but Amazon itself will keep growing. It's it's

710
00:39:21,040 --> 00:39:24,040
Speaker 1: fair share because the overall pie is growing, right, So

711
00:39:24,880 --> 00:39:27,720
Speaker 1: we're just gonna have different people trying to compete different

712
00:39:27,719 --> 00:39:30,080
Speaker 1: slivers of Amazon because you know, it's a big company,

713
00:39:30,120 --> 00:39:33,560
Speaker 1: and that makes sense. Facebook is very different Facebook. It

714
00:39:33,680 --> 00:39:37,040
Speaker 1: is impossible to have to kind of replicate the impact

715
00:39:37,280 --> 00:39:40,680
Speaker 1: that it has on small businesses around the world, either Instagram,

716
00:39:40,760 --> 00:39:44,640
Speaker 1: author Facebook, or blue App. And so again, disrupting Facebook,

717
00:39:44,680 --> 00:39:46,440
Speaker 1: I think it's going to be very, very hard. And

718
00:39:46,440 --> 00:39:50,080
Speaker 1: I hear this constant refrain that says, oh, who uses

719
00:39:50,080 --> 00:39:53,040
Speaker 1: Facebook anymore? Yeah, maybe you don't, but to use Instagram,

720
00:39:53,480 --> 00:39:56,200
Speaker 1: use WhatsApp, you know, moms use and you know, my

721
00:39:56,239 --> 00:39:58,960
Speaker 1: wife and you know, we use Facebook groups. The people

722
00:39:59,040 --> 00:40:02,399
Speaker 1: have stopped using Facebook for their friends and they're now

723
00:40:02,600 --> 00:40:05,239
Speaker 1: finding groups for themselves. So my wife and you know,

724
00:40:05,360 --> 00:40:07,920
Speaker 1: found a a tide pool group for my six year

725
00:40:07,920 --> 00:40:11,640
Speaker 1: old son, who who loves tipples. Right, Facebook is morphing yourself.

726
00:40:11,640 --> 00:40:14,080
Speaker 1: And guess what what is Facebook doing? They're taking those

727
00:40:14,280 --> 00:40:17,400
Speaker 1: dozens of billions of m of R and D spend

728
00:40:17,440 --> 00:40:20,920
Speaker 1: every year and they're saying, listen, we cannot be completely

729
00:40:21,000 --> 00:40:23,319
Speaker 1: dependent on Apple for distribution. We have to build our

730
00:40:23,320 --> 00:40:27,240
Speaker 1: own platform. Because Apple itself realizes that that services business

731
00:40:27,680 --> 00:40:30,040
Speaker 1: is a very lucrative business and they want to get

732
00:40:30,040 --> 00:40:33,000
Speaker 1: a piece of that, and so hiding behind the guys

733
00:40:33,080 --> 00:40:36,400
Speaker 1: of privacy, they are trying to build an entire at stack.

734
00:40:36,719 --> 00:40:39,520
Speaker 1: And so you're seeing Apple and Facebook going against each other.

735
00:40:40,000 --> 00:40:43,640
Speaker 1: There are plenty of self enforced errors that these companies

736
00:40:44,000 --> 00:40:48,160
Speaker 1: do on themselves versus just competition, and looking ten years up,

737
00:40:48,880 --> 00:40:51,520
Speaker 1: I don't think anything. So on a ten year basis,

738
00:40:51,560 --> 00:40:54,520
Speaker 1: I don't think anything happens to either Facebook or Apple,

739
00:40:54,920 --> 00:40:58,640
Speaker 1: or Microsoft or Google or Amazon. Nothing happened. So maybe

740
00:40:58,719 --> 00:41:02,399
Speaker 1: regulatory iybe there's stress on regulatory reap of view, maybe

741
00:41:02,400 --> 00:41:06,640
Speaker 1: there's antitrust tension. But the reality is that if you

742
00:41:06,719 --> 00:41:09,000
Speaker 1: break up Facebook or Google, the some of the parts

743
00:41:09,040 --> 00:41:12,120
Speaker 1: is bigger than the whole, and so it's hard to

744
00:41:12,160 --> 00:41:15,400
Speaker 1: see in the next five or ten years anything happening

745
00:41:15,440 --> 00:41:18,480
Speaker 1: to these companies. Wait, can I just press you on

746
00:41:18,480 --> 00:41:21,520
Speaker 1: that regulatory point, because you know, I'm over here in

747
00:41:21,640 --> 00:41:24,920
Speaker 1: Hong Kong and it's kind of striking to me that

748
00:41:25,040 --> 00:41:28,560
Speaker 1: the only thing that the you know, politicians of the

749
00:41:28,600 --> 00:41:31,400
Speaker 1: world or the authorities of the world seem to agree

750
00:41:31,440 --> 00:41:34,760
Speaker 1: on is that they need to be limiting big text

751
00:41:34,800 --> 00:41:37,839
Speaker 1: power in some ways. So in Europe, the US, and

752
00:41:38,400 --> 00:41:42,000
Speaker 1: in um China there's this agreement that they need to

753
00:41:42,000 --> 00:41:46,879
Speaker 1: do something about tech. Why, like, why aren't you more

754
00:41:46,920 --> 00:41:50,160
Speaker 1: worried about it? Or how realistic do you think that

755
00:41:50,280 --> 00:41:54,440
Speaker 1: breakup risk might actually be? So, first of all, the

756
00:41:54,520 --> 00:41:57,960
Speaker 1: worries and the tension around something bad happening to big

757
00:41:58,000 --> 00:42:01,560
Speaker 1: tech in quotes, it's all already embedded in their multiples.

758
00:42:01,600 --> 00:42:04,560
Speaker 1: And that is why Ali Baba rates at fourteen times.

759
00:42:04,640 --> 00:42:06,960
Speaker 1: And that is why Facebook crates that I think, you know,

760
00:42:07,000 --> 00:42:09,239
Speaker 1: twenty times or twenty two times. And that's why these

761
00:42:09,320 --> 00:42:12,799
Speaker 1: multiples by Amazon rates at sixteen times. That is why

762
00:42:12,840 --> 00:42:16,240
Speaker 1: their multiples are so cheap. There's a reason why Amazon

763
00:42:16,320 --> 00:42:19,399
Speaker 1: stock hasn't moved in nine months, right, it's just it's

764
00:42:19,400 --> 00:42:22,600
Speaker 1: a flat line. Right. There's a lot of tension, right,

765
00:42:22,640 --> 00:42:25,800
Speaker 1: and that's somewhat embedded in multiple So I'm not intelligent

766
00:42:25,920 --> 00:42:29,040
Speaker 1: enough to go and predict, you know, the binomial tree

767
00:42:29,239 --> 00:42:32,640
Speaker 1: of decision making in different governments. But so our framework

768
00:42:32,680 --> 00:42:36,480
Speaker 1: is simple. The threat of regulation is here to stay,

769
00:42:37,400 --> 00:42:42,400
Speaker 1: and the threat of regulation is real depending on country.

770
00:42:42,600 --> 00:42:45,960
Speaker 1: In Europe it's very real, right, they've been finding American

771
00:42:46,000 --> 00:42:49,439
Speaker 1: companies for a long time. In China, it's very very real,

772
00:42:49,600 --> 00:42:52,920
Speaker 1: as we've seen over the last six months, right, and

773
00:42:53,040 --> 00:42:57,320
Speaker 1: everyone is now in regulatory huddle down mood. In the US,

774
00:42:57,440 --> 00:43:01,040
Speaker 1: we we hear news of regulation, and we we hear

775
00:43:01,080 --> 00:43:04,839
Speaker 1: senators you know, you know, talking to these CEOs in

776
00:43:04,880 --> 00:43:08,000
Speaker 1: these in these meetings, and you know, it's not clear

777
00:43:08,040 --> 00:43:09,480
Speaker 1: to me what's going to come out of it. There's

778
00:43:09,520 --> 00:43:12,920
Speaker 1: there's some there's some tension for sure. And so what

779
00:43:12,960 --> 00:43:15,160
Speaker 1: we do is we say, let's take a very sober

780
00:43:15,200 --> 00:43:17,880
Speaker 1: view of this. The only thing we can control in

781
00:43:17,880 --> 00:43:22,040
Speaker 1: our hands is our view on where the business grows,

782
00:43:22,080 --> 00:43:24,480
Speaker 1: because we are business analysts first, and therefore where the

783
00:43:24,560 --> 00:43:27,240
Speaker 1: revenues grow, where is free cash flow grow, whereas ebada

784
00:43:27,360 --> 00:43:32,040
Speaker 1: grow over time? And then let us put suitably sober

785
00:43:32,120 --> 00:43:35,440
Speaker 1: and and low multiples have needed on these stocks and

786
00:43:35,520 --> 00:43:38,719
Speaker 1: still see if we can make a real return of

787
00:43:38,760 --> 00:43:41,360
Speaker 1: not which is kind of what we aspire to me

788
00:43:42,280 --> 00:43:44,560
Speaker 1: and everything else for us is gravy on the cake.

789
00:43:44,800 --> 00:43:47,400
Speaker 1: It's it's just all gravy. Like pick everything else the

790
00:43:47,440 --> 00:43:50,080
Speaker 1: upside optionality for us, And so I think we just

791
00:43:50,120 --> 00:43:52,760
Speaker 1: have to take that very sober view on what happens

792
00:43:52,800 --> 00:43:55,719
Speaker 1: to the world. But the real the reality is do

793
00:43:55,760 --> 00:43:59,480
Speaker 1: you take China as a case study the Chinese government

794
00:43:59,560 --> 00:44:02,880
Speaker 1: when you October, there's all this news about and Financial

795
00:44:02,920 --> 00:44:06,400
Speaker 1: So Ali Baba being unfairly targeted. First of all, that

796
00:44:06,560 --> 00:44:10,920
Speaker 1: is completely wrong. They were targeting everybody. It just so

797
00:44:11,040 --> 00:44:13,480
Speaker 1: happened that at a point in time, after one of

798
00:44:13,480 --> 00:44:17,040
Speaker 1: the founders comments, it gave them the reason to go

799
00:44:17,160 --> 00:44:20,399
Speaker 1: behind Ali Baba. And as a result of that, it

800
00:44:20,560 --> 00:44:23,520
Speaker 1: was they cracked on and Financial the I p O,

801
00:44:23,560 --> 00:44:26,080
Speaker 1: which is the right thing to do, because you cannot

802
00:44:26,120 --> 00:44:28,719
Speaker 1: have a consumer lending business in a country as big

803
00:44:28,719 --> 00:44:33,120
Speaker 1: as and Financial correct that creates systematic risk to the

804
00:44:33,200 --> 00:44:36,360
Speaker 1: Chinese financial system. So I would argue they did the

805
00:44:36,480 --> 00:44:40,560
Speaker 1: right thing early on by slowing it down completely. So actually,

806
00:44:40,640 --> 00:44:43,120
Speaker 1: kudos to those regulators. You can't have a lending business

807
00:44:43,120 --> 00:44:45,239
Speaker 1: growing as fast as they were growing. Last number one

808
00:44:46,040 --> 00:44:50,640
Speaker 1: now number two is Ali Baba historically was the propagator

809
00:44:50,800 --> 00:44:54,680
Speaker 1: of certain anti monopoly practices. But it wasn't that they

810
00:44:54,719 --> 00:44:57,319
Speaker 1: cracked on Ali Baba alone. First of all, they were

811
00:44:57,320 --> 00:45:00,160
Speaker 1: cracking on Alibaba for three years task to pressure from

812
00:45:00,200 --> 00:45:02,239
Speaker 1: Pindo though, which is which is the right thing to do.

813
00:45:02,760 --> 00:45:05,759
Speaker 1: But now Pindo though and made Toun themselves are in

814
00:45:05,800 --> 00:45:09,000
Speaker 1: the regularly crosshairs because they are being quite aggressive in

815
00:45:09,080 --> 00:45:12,520
Speaker 1: growing a specific form of grocery called community group buying.

816
00:45:12,800 --> 00:45:15,000
Speaker 1: So what happens to you know, all the you know

817
00:45:15,000 --> 00:45:17,560
Speaker 1: people in the wet markets in China. I would argue

818
00:45:17,600 --> 00:45:21,560
Speaker 1: that I think the Chinese regulatory strategy is the right thing,

819
00:45:21,600 --> 00:45:26,000
Speaker 1: because things in China get incredibly aggressively competitive and then

820
00:45:26,040 --> 00:45:28,080
Speaker 1: creates a lot of you know, second order effects that

821
00:45:28,120 --> 00:45:32,239
Speaker 1: nobody wants. I don't think the regulatory authorities there want

822
00:45:32,280 --> 00:45:35,600
Speaker 1: to destroy their local champions. So the reason why we're

823
00:45:35,600 --> 00:45:38,719
Speaker 1: actually quite confident about investing in China is we've been

824
00:45:38,719 --> 00:45:41,160
Speaker 1: through the Spain a few times in the past. We've

825
00:45:41,160 --> 00:45:43,799
Speaker 1: seen this post Ali Baba Ipo. We've see this in

826
00:45:43,840 --> 00:45:46,839
Speaker 1: two thousand and fifteen, in August fifteen. So we've seen

827
00:45:46,880 --> 00:45:50,080
Speaker 1: these pockets of six months to one year where things

828
00:45:50,120 --> 00:45:53,560
Speaker 1: get really bad. But if you look beyond that one,

829
00:45:53,560 --> 00:45:55,440
Speaker 1: they're and luckily for us, we have you know, three

830
00:45:55,520 --> 00:45:58,439
Speaker 1: year locked in capital, we have the we're lucky enough

831
00:45:58,480 --> 00:46:00,880
Speaker 1: to have the place to look out one to two

832
00:46:00,960 --> 00:46:03,880
Speaker 1: years and then think about what those companies could look like,

833
00:46:04,160 --> 00:46:06,120
Speaker 1: which is why China is such a great place to

834
00:46:06,200 --> 00:46:09,160
Speaker 1: invest right now in my opinion. Now let's move to

835
00:46:09,200 --> 00:46:13,560
Speaker 1: the US. In the US, I hope that we don't

836
00:46:13,560 --> 00:46:17,080
Speaker 1: shoot our national champions in the foot. Now, as you know,

837
00:46:17,120 --> 00:46:20,279
Speaker 1: as an American resident like I, I just find it.

838
00:46:21,400 --> 00:46:23,680
Speaker 1: I'm stressed out when I when I look at the

839
00:46:23,840 --> 00:46:27,360
Speaker 1: CEO is being interrogated in the Senate, and for right reasons.

840
00:46:27,400 --> 00:46:30,360
Speaker 1: I get why they are, but I feel like we

841
00:46:30,400 --> 00:46:33,360
Speaker 1: are behind the curve in our sophistication and understanding of

842
00:46:33,400 --> 00:46:37,760
Speaker 1: what these companies do. But my views, okay, the worst

843
00:46:37,760 --> 00:46:41,480
Speaker 1: case outcome is that these companies get regulated, and what

844
00:46:41,640 --> 00:46:44,840
Speaker 1: is the ultimate impact regulation they break up these companies.

845
00:46:45,480 --> 00:46:47,560
Speaker 1: The way I'm at peace about this is that will

846
00:46:47,560 --> 00:46:49,560
Speaker 1: create a lot of tension in these companies. And the

847
00:46:49,640 --> 00:46:51,839
Speaker 1: multiples are low, so maybe they even go low up.

848
00:46:52,120 --> 00:46:54,600
Speaker 1: And I actually argue that on a longer term basis,

849
00:46:54,719 --> 00:46:57,400
Speaker 1: if Google got broken up, or Amazon got broken up,

850
00:46:57,560 --> 00:47:00,640
Speaker 1: or or our Facebook or group broken up, it would

851
00:47:00,640 --> 00:47:03,480
Speaker 1: actually create a couple of incremental trillion dollars and equity value,

852
00:47:03,560 --> 00:47:05,840
Speaker 1: because if you think about Amazon today, there's a trillion

853
00:47:05,840 --> 00:47:09,040
Speaker 1: dollars embedded today in the cloud business. Out three years,

854
00:47:09,480 --> 00:47:12,719
Speaker 1: you add international retail, that's a few hundred billion dollars

855
00:47:12,960 --> 00:47:15,960
Speaker 1: effectively today at Amazon stock at close to three dollars

856
00:47:15,960 --> 00:47:18,319
Speaker 1: a share, I'm going to argue that you get the

857
00:47:18,560 --> 00:47:22,680
Speaker 1: entire US business and the ads business for free. And

858
00:47:22,719 --> 00:47:25,279
Speaker 1: that's the beauty. We did the Anazon Ali Baba in

859
00:47:25,320 --> 00:47:28,000
Speaker 1: Ali Baba's case and here and this is this is

860
00:47:28,000 --> 00:47:31,520
Speaker 1: super interesting. It's such a cheap stock right now that

861
00:47:31,840 --> 00:47:34,520
Speaker 1: in three years under our estimates, if you strip out

862
00:47:34,560 --> 00:47:37,920
Speaker 1: the value of Ali Cloud and give it a low multiple,

863
00:47:37,960 --> 00:47:40,319
Speaker 1: strip out the value of and financials, give it a

864
00:47:40,400 --> 00:47:44,400
Speaker 1: sober multiple, sober equity value. Give some credit for their

865
00:47:44,440 --> 00:47:47,319
Speaker 1: on demands. This is in some some value for their

866
00:47:47,800 --> 00:47:51,480
Speaker 1: non retailed businesses, sorry that their retail offline businesses. You

867
00:47:51,560 --> 00:47:54,719
Speaker 1: buy the core business Coal, Bow and Team all which

868
00:47:54,760 --> 00:47:56,680
Speaker 1: by the way, were the hottest things back in the

869
00:47:56,719 --> 00:48:00,480
Speaker 1: day in China, still growing gm V between well and

870
00:48:00,560 --> 00:48:03,200
Speaker 1: seventeen percent for as far as the eye can see.

871
00:48:03,640 --> 00:48:08,040
Speaker 1: And remember they're still undemonetized, so monetization probably grows eighteen

872
00:48:08,800 --> 00:48:11,120
Speaker 1: for as long as the eye can see if you

873
00:48:11,200 --> 00:48:13,520
Speaker 1: do the math there, you get that business growing at

874
00:48:13,600 --> 00:48:17,800
Speaker 1: high tails to low twenties for four times EBITDA looking

875
00:48:17,800 --> 00:48:21,840
Speaker 1: out three years and negative EBADA looking out five years. Negative.

876
00:48:21,880 --> 00:48:24,880
Speaker 1: You actually get paid to own those businesses. And again

877
00:48:24,920 --> 00:48:27,960
Speaker 1: when you when you think about all the drivers of

878
00:48:28,000 --> 00:48:30,319
Speaker 1: what these companies are doing, the same thing with Peloton, right,

879
00:48:30,760 --> 00:48:35,600
Speaker 1: the company is such an incredible machine of hardware and

880
00:48:35,680 --> 00:48:39,800
Speaker 1: software well verticalized, and you strip out the hardware business,

881
00:48:40,200 --> 00:48:43,799
Speaker 1: you get paid to own the entire subscription business, which

882
00:48:43,840 --> 00:48:46,200
Speaker 1: is the Peloton app and what you pay forty bucks

883
00:48:46,400 --> 00:48:49,239
Speaker 1: forty bucks a month for. So there's just so much

884
00:48:49,280 --> 00:48:53,040
Speaker 1: tremendous value hidden that is not captured in the headline

885
00:48:53,040 --> 00:48:56,480
Speaker 1: EPs earnings of the headline ebadwarn nest. I guess that

886
00:48:56,600 --> 00:48:59,719
Speaker 1: real quickly and and just real briefly. I mean, what

887
00:48:59,760 --> 00:49:02,840
Speaker 1: would you say was the biggest surprise, uh for you?

888
00:49:02,960 --> 00:49:05,439
Speaker 1: Like what actually was there anything in the last year

889
00:49:05,520 --> 00:49:09,680
Speaker 1: either in the real economy or market they genuinely sort

890
00:49:09,680 --> 00:49:13,920
Speaker 1: of like went against your intuitions or assumption. Honestly, the

891
00:49:14,080 --> 00:49:17,319
Speaker 1: entire ear last year, Joe went again, I guess that's

892
00:49:17,320 --> 00:49:20,160
Speaker 1: a pretty good answer. The entire year it was a surprise,

893
00:49:20,239 --> 00:49:22,400
Speaker 1: and so I would argue that you know, you know,

894
00:49:22,520 --> 00:49:25,240
Speaker 1: we've been constantly humbled in this business. You get humbled

895
00:49:25,280 --> 00:49:27,879
Speaker 1: all the time, and last year was a humbling ear.

896
00:49:27,960 --> 00:49:30,520
Speaker 1: Even though we did well, it was a humbling ear

897
00:49:30,719 --> 00:49:34,480
Speaker 1: and lots of new learnings and you know, hopefully it

898
00:49:34,520 --> 00:49:38,200
Speaker 1: sets us up for a great next many years. Well,

899
00:49:38,239 --> 00:49:41,240
Speaker 1: good luck and Realm, thank you so much for coming

900
00:49:41,239 --> 00:49:44,200
Speaker 1: on a lot. I so appreciated, Tracy and Joe, thank

901
00:49:44,239 --> 00:50:01,240
Speaker 1: you for having me. Thanks. That was really good, Tracy,

902
00:50:01,280 --> 00:50:02,799
Speaker 1: I really like that one. You know, if they're all

903
00:50:02,880 --> 00:50:06,000
Speaker 1: like the sort of like lumber and housing and crypto one.

904
00:50:06,320 --> 00:50:08,759
Speaker 1: It was nice to hear like here's a let's talk

905
00:50:08,800 --> 00:50:11,880
Speaker 1: some tech stocks talk about tech stocks. Yeah, it was

906
00:50:12,000 --> 00:50:14,719
Speaker 1: very comforting. I do think though, I mean I do

907
00:50:14,840 --> 00:50:19,800
Speaker 1: think directionally, I agree with rom just this idea that

908
00:50:20,280 --> 00:50:22,480
Speaker 1: the world is going to go back to normal and

909
00:50:22,719 --> 00:50:25,400
Speaker 1: all these people who have been buying stuff off Amazon

910
00:50:25,719 --> 00:50:28,040
Speaker 1: or you know, watching things on Netflix and doing meetings

911
00:50:28,040 --> 00:50:31,160
Speaker 1: on zoom um are all going to stop doing that.

912
00:50:31,280 --> 00:50:34,880
Speaker 1: Like that seems wrong to me. And you know the

913
00:50:34,920 --> 00:50:37,680
Speaker 1: fact that we are doing this podcast over zoom um

914
00:50:37,719 --> 00:50:40,160
Speaker 1: and I'm about to order something off of Amazon like

915
00:50:40,640 --> 00:50:42,480
Speaker 1: you know, you can see it in your day to

916
00:50:42,520 --> 00:50:45,279
Speaker 1: day life. Yeah, no, exactly right, And I kind of

917
00:50:45,320 --> 00:50:48,000
Speaker 1: got this appression that I mean, the way I was like,

918
00:50:48,719 --> 00:50:50,920
Speaker 1: we're I think they sort of like go back to

919
00:50:51,080 --> 00:50:55,640
Speaker 1: normal is like a bad frame. I mean, yes, like

920
00:50:55,680 --> 00:50:57,960
Speaker 1: we're going outside board. People are going to go back

921
00:50:58,000 --> 00:51:00,839
Speaker 1: to the offices. But his point was, well, okay, like

922
00:51:01,440 --> 00:51:04,360
Speaker 1: that's still gonna mean that businesses. It's doesn't mean that

923
00:51:04,400 --> 00:51:08,319
Speaker 1: businesses aren't going to use Facebook or Instagram for advertising.

924
00:51:08,320 --> 00:51:10,480
Speaker 1: And I thought it was that was an interesting point,

925
00:51:11,080 --> 00:51:13,120
Speaker 1: which is that like, look, a lot of people are

926
00:51:13,120 --> 00:51:14,920
Speaker 1: gonna do a lot of spending. We're gonna travel more

927
00:51:14,960 --> 00:51:16,600
Speaker 1: this year than we did last year. We're gonna go

928
00:51:16,640 --> 00:51:19,600
Speaker 1: to restaurants more than we did last year. Well, that

929
00:51:19,719 --> 00:51:22,319
Speaker 1: creates a lot of demand for advertising in the place

930
00:51:22,360 --> 00:51:26,160
Speaker 1: people advertising is online, and so this idea of like

931
00:51:26,600 --> 00:51:29,160
Speaker 1: a shift offline in some ways it is true, but

932
00:51:29,320 --> 00:51:33,800
Speaker 1: in some ways it just means more digital business. Yeah.

933
00:51:34,040 --> 00:51:35,920
Speaker 1: I think that's right. No, you know, it's just like

934
00:51:36,040 --> 00:51:39,200
Speaker 1: another thing that I thought about is this, like you know,

935
00:51:39,480 --> 00:51:42,279
Speaker 1: people for years of like text dogs are expensive, right,

936
00:51:42,360 --> 00:51:45,000
Speaker 1: Like at any time we could have recorded this podcast

937
00:51:45,000 --> 00:51:46,839
Speaker 1: in the last decade and someone would have said tech

938
00:51:46,840 --> 00:51:50,640
Speaker 1: stocks are expensive, but clearly and like in retrospect, they weren't. Right.

939
00:51:51,080 --> 00:51:53,759
Speaker 1: Like in retrospect, not only did the stocks go up

940
00:51:53,760 --> 00:51:55,880
Speaker 1: a lot more, but also like they crushed. You know,

941
00:51:55,920 --> 00:51:59,040
Speaker 1: if you look at say Amazon's earnings today, I'm certain

942
00:51:59,719 --> 00:52:02,319
Speaker 1: it's higher than it was. It's higher than what people

943
00:52:02,320 --> 00:52:07,279
Speaker 1: would have predicted. And so I think, like one way

944
00:52:07,320 --> 00:52:10,880
Speaker 1: to interpret his thesis is just like all these companies

945
00:52:10,920 --> 00:52:15,160
Speaker 1: have been underestimated for years, and there's no reason to

946
00:52:15,200 --> 00:52:18,919
Speaker 1: think that they're not still underestimated even after they've done

947
00:52:18,960 --> 00:52:23,000
Speaker 1: so well well. This is the one thing that I

948
00:52:23,040 --> 00:52:25,879
Speaker 1: was thinking about, which is how much of that success

949
00:52:26,040 --> 00:52:29,520
Speaker 1: is fundamentals versus how much of it is flow and

950
00:52:29,640 --> 00:52:32,640
Speaker 1: the idea of you know, if you're Amazon, you're consistently

951
00:52:32,800 --> 00:52:35,239
Speaker 1: a winner, and you just sort of attract more and

952
00:52:35,280 --> 00:52:37,920
Speaker 1: more money and eventually it becomes a sort of self

953
00:52:38,040 --> 00:52:41,640
Speaker 1: fulfilling cycle. And that's one reason why, um, the stock

954
00:52:41,640 --> 00:52:44,520
Speaker 1: price never comes down and the valuation gets really expensive

955
00:52:44,560 --> 00:52:46,840
Speaker 1: because there's nothing to sort of break the cycle of

956
00:52:46,880 --> 00:52:49,480
Speaker 1: new money flowing into it. But then on the other hand,

957
00:52:49,560 --> 00:52:53,040
Speaker 1: like you know, as long as Amazon doesn't go bust,

958
00:52:53,120 --> 00:52:56,560
Speaker 1: which it seems very unlikely to do. Maybe that doesn't

959
00:52:56,600 --> 00:52:58,560
Speaker 1: matter so much, right, It just becomes a sort of

960
00:52:58,600 --> 00:53:02,480
Speaker 1: like battle of money that rolls along, collecting more money

961
00:53:02,480 --> 00:53:05,680
Speaker 1: and getting even bigger. Right and again, to be fair,

962
00:53:05,760 --> 00:53:08,760
Speaker 1: like they do, these companies do seem to crush earnings

963
00:53:08,880 --> 00:53:12,160
Speaker 1: estimates year after year after year. So there's there's also

964
00:53:12,200 --> 00:53:18,320
Speaker 1: that that also helps helps a little bit, doesn't it. Yeah, alright,

965
00:53:18,560 --> 00:53:21,760
Speaker 1: shall we leave it there? Let's leave it there. Okay,

966
00:53:21,840 --> 00:53:24,560
Speaker 1: this has been another episode of the All Thoughts podcast.

967
00:53:24,600 --> 00:53:27,160
Speaker 1: I'm Tracy Alloway. You can follow me on Twitter at

968
00:53:27,160 --> 00:53:30,399
Speaker 1: Tracy Alloway and I'm Joe wi Isn't All. You can

969
00:53:30,440 --> 00:53:33,239
Speaker 1: follow me on Twitter at the Stalwart. And you can

970
00:53:33,280 --> 00:53:36,440
Speaker 1: follow our guest Rom Parmi Saran. He's on Twitter at

971
00:53:37,000 --> 00:53:41,960
Speaker 1: Underscore rom Underscore. Follow our producer Laura Carlson, She's at

972
00:53:42,080 --> 00:53:45,600
Speaker 1: Laura M. Carlson. Follow the Bloomberg head of podcast, Francesca

973
00:53:45,680 --> 00:53:48,640
Speaker 1: Levi at Francesca Today, and check out all of our

974
00:53:48,680 --> 00:53:52,759
Speaker 1: podcasts at Bloomberg under the handle at podcasts. Thanks for

975
00:53:52,800 --> 00:54:01,040
Speaker 1: listening to