WEBVTT - Is ARK the New Janus Twenty? 0:00:05.920 --> 0:00:08.879 Welcome the trillions. I'm Joel Webber and I'm Eric Beltrnis. 0:00:11.880 --> 0:00:14.840 Happy New Year, Eric, Yeah, you too, Happy New Year. 0:00:14.880 --> 0:00:19.759 I'm ready for me too. You know, at the beginning 0:00:19.760 --> 0:00:22.560 of the year already there's a lot of talk about 0:00:23.079 --> 0:00:28.440 bubble bubbles potentially we've had despite the pandemic and a 0:00:28.560 --> 0:00:33.440 really awful um, equities were way up, a lot of 0:00:33.479 --> 0:00:35.239 investors made a lot of money. And yet here we 0:00:35.280 --> 0:00:39.479 are already and there's just this palpable tension over can it? 0:00:39.640 --> 0:00:43.640 Can it last? Yeah? I mean people have been asking 0:00:43.680 --> 0:00:46.800 can it last? You know ago, so it's been a 0:00:46.800 --> 0:00:50.120 tough trade to bail early and so but it's a 0:00:50.240 --> 0:00:52.640 it's a question that won't go away and keeps getting greater. 0:00:53.360 --> 0:00:56.000 And you know, the poster child for this era and 0:00:56.040 --> 0:00:59.840 this sort of tech and growth moment that we're in 0:01:00.080 --> 0:01:02.200 is is definitely ARC. You know, we had Cathy wood 0:01:02.280 --> 0:01:06.240 on maybe a year ago. We interviewed her and ARC 0:01:06.319 --> 0:01:08.920 is now taking in money hand over fifth and the 0:01:09.000 --> 0:01:12.559 performance just won't quit. And so when you see something 0:01:12.680 --> 0:01:15.320 go up that much, people start to wonder how long 0:01:15.360 --> 0:01:17.200 it could last. And when we when I tweet about ARC, 0:01:17.959 --> 0:01:21.400 one thing that people will say is this is reminds 0:01:21.400 --> 0:01:24.480 me the Janis twenty um. And the other thing that 0:01:24.520 --> 0:01:26.440 people will say about what's going on is that reminds 0:01:26.480 --> 0:01:28.440 them more of the Internet era of the late nineties 0:01:29.120 --> 0:01:31.560 then it does say two thousand eight, you know that 0:01:31.560 --> 0:01:33.840 that this is more of a techy growthy kind of 0:01:34.319 --> 0:01:39.320 upswing rather than two thousand eights corrections. So we I thought, well, 0:01:39.400 --> 0:01:42.040 let's let's see if we can get the manager of 0:01:42.080 --> 0:01:45.559 the Janice twenty, who was managing money at the fund 0:01:45.640 --> 0:01:49.280 in the late nineties, to basically, you know, talk about 0:01:49.280 --> 0:01:52.760 whether that comparison is fair and see what he thinks 0:01:52.760 --> 0:01:53.840 of it all. And let me just give you some 0:01:53.920 --> 0:01:56.400 numbers on Janie twenty. This is a fund. If you 0:01:56.440 --> 0:01:59.440 don't know, it was really the big fund of its era. 0:02:00.040 --> 0:02:04.880 It went up five between nine that's about what that 0:02:04.960 --> 0:02:08.880 five six years. That's exactly what Kathy is up right now. 0:02:08.919 --> 0:02:11.720 After six years it got to thirty five billion. That's 0:02:11.760 --> 0:02:14.920 exactly what Cathy Woods Fund has. Although jan Is stopped 0:02:14.919 --> 0:02:17.280 taking in cash, Kathy might have to might get bigger. 0:02:17.800 --> 0:02:20.320 But then it fell in two thousand, two thousand one 0:02:20.360 --> 0:02:22.119 with the bull burst, but then it went up another 0:02:22.480 --> 0:02:27.119 pent up until two thousand seven. So with without further ado, 0:02:27.160 --> 0:02:29.600 we have the manager of that fund, Scott Chozel, who 0:02:29.639 --> 0:02:32.560 was the manager from seven to two thousand seven, and 0:02:32.639 --> 0:02:35.200 during that time he was Mutual Fund Magazines Manager of 0:02:35.200 --> 0:02:38.560 the Year and honorable mention for a Morning Star for 0:02:38.600 --> 0:02:40.920 the same award in two thousand seven. And there's a 0:02:40.960 --> 0:02:43.160 great headline. This just tells you how how big of 0:02:43.200 --> 0:02:45.320 a deal this guy was. There was a great headline 0:02:45.360 --> 0:02:48.400 from the Denver Post when he left Jan's twenty and 0:02:48.440 --> 0:02:52.960 two thousand seven, like Elway, Shozel leaves on top. And 0:02:53.040 --> 0:02:55.959 so you know, that's a long it's a long time ago. 0:02:56.000 --> 0:03:00.400 It seems like a whole another lifetime, but it wasn't 0:03:00.440 --> 0:03:02.760 that long ago. And you know, history does have a 0:03:02.800 --> 0:03:06.560 good habit of rhyming. So um, I'm really excited to 0:03:06.600 --> 0:03:09.880 talk to him about how he sees what's going on 0:03:09.960 --> 0:03:12.440 today and some of his experiences back then. Me too, 0:03:12.440 --> 0:03:20.959 And he's going to join us from Denver, Colorado this 0:03:21.080 --> 0:03:29.440 time on Trillions is our the new Janet twenty Scott, 0:03:29.440 --> 0:03:33.720 Welcome to Trillions. Thank you very much. I appreciate the 0:03:33.720 --> 0:03:36.680 the trip down memory lane. I like the part where 0:03:36.760 --> 0:03:40.640 Eric said, uh, you know that that you left, um, 0:03:40.680 --> 0:03:42.560 and you left on the high part right, So what 0:03:42.600 --> 0:03:49.480 are you doing now? Well, Um, I'm basically managing money 0:03:49.560 --> 0:03:54.240 for our family, running a family office and uh focused 0:03:54.280 --> 0:03:58.200 on our foundation. And I spent a lot of time 0:03:58.240 --> 0:04:01.320 with my kids as they navigated high school and into 0:04:01.320 --> 0:04:04.960 college and now out of graduate school. Um. But I'm 0:04:05.040 --> 0:04:07.600 very active in the markets every day. Uh. I still 0:04:07.680 --> 0:04:12.280 have a cadre of former Janice analysts and portfolio managers 0:04:12.320 --> 0:04:14.320 I stay very close with. I just was on the 0:04:14.360 --> 0:04:17.000 phone for half an hour this morning with a friend 0:04:17.000 --> 0:04:21.720 of mine who used to work with Paul Tutor Jones. UM, 0:04:21.720 --> 0:04:25.760 so I stood pretty connected to the markets. I've I've 0:04:25.800 --> 0:04:28.760 never considered it a job, It's it's a lifelong hobby. 0:04:28.920 --> 0:04:35.479 And understand that you also have a farm in downtown Denver. Well, 0:04:35.880 --> 0:04:38.720 I have. I live on a lot of people call 0:04:38.760 --> 0:04:43.240 it the farm. It's uh just outside of Denver. It's 0:04:43.240 --> 0:04:45.800 about ten minutes away from ten twelve minutes away from 0:04:45.800 --> 0:04:48.760 downtown Denver. It's it's kind of a rural area and 0:04:48.800 --> 0:04:51.680 we actually have a working barn and hate fields that 0:04:51.720 --> 0:04:56.039 we cut hay in and uh real live horses. Uh 0:04:56.320 --> 0:04:59.760 So it's uh. I've been known to muck stalls from 0:04:59.760 --> 0:05:04.039 time to time when I'm in the doghouse with my wife. Um, 0:05:04.160 --> 0:05:07.600 it's a little oasis in the city. Um, I am 0:05:07.680 --> 0:05:10.080 kind of jealous. I am in Philly and I keep 0:05:10.160 --> 0:05:13.080 dreaming about a country life. Maybe I'm you're you're my model. 0:05:13.080 --> 0:05:16.240 I'm gonna get to where you are someday. But uh, anyway, 0:05:16.320 --> 0:05:19.400 until then, UM, let's talk a little bit about Arcum. 0:05:20.200 --> 0:05:22.719 You've you keep up at the market, you you follow this, 0:05:23.760 --> 0:05:27.560 how do you see this this fund in particular, Cathy 0:05:27.640 --> 0:05:30.240 would arc Let's just start with your views on that. 0:05:30.279 --> 0:05:33.120 You know, do you see her as really echoing what 0:05:33.200 --> 0:05:37.960 you did at Janice twenty at the time. Well, I 0:05:38.000 --> 0:05:44.000 am supremely impressed with the way she has structured her firm, um, 0:05:44.839 --> 0:05:48.960 her willingness to invest with a point of view, the 0:05:49.000 --> 0:05:52.840 way that she's been able to successfully leverage social media 0:05:53.400 --> 0:05:59.520 to augment the research process. Um. Uh. She first had 0:05:59.560 --> 0:06:03.440 my radar screen probably eighteen that twenty four months ago, 0:06:04.080 --> 0:06:07.960 and I've been watching uh and I gotta say, I'm 0:06:08.000 --> 0:06:10.719 I'm very impressed. I think her analysts are doing a 0:06:10.720 --> 0:06:16.640 good job. Um. I think she's got a great view 0:06:16.800 --> 0:06:21.520 of the future. Uh. And if I were gonna if 0:06:21.520 --> 0:06:23.719 I were gonna go back into the business and start 0:06:23.760 --> 0:06:28.520 a firm. She has created a fantastic template. There's many 0:06:28.560 --> 0:06:32.279 similarities between the Janis twenty fund and ARC. For sure, 0:06:32.400 --> 0:06:36.440 we were very research centric. We had a group of 0:06:36.800 --> 0:06:40.880 extraordinary analysts, many of which I'm still in contact with today, 0:06:41.520 --> 0:06:46.200 that we're really focused on trying to invest in the future, 0:06:46.400 --> 0:06:52.200 and like everything, over time things get better. And I 0:06:52.200 --> 0:06:55.000 think she's done a very very good job of extending 0:06:55.400 --> 0:06:58.200 a lot of the things we were doing at Janis 0:06:58.240 --> 0:07:01.560 back in the late nineties and two thousand. So there's 0:07:02.040 --> 0:07:04.520 the idea of being concentrated. And you know, we Um 0:07:04.560 --> 0:07:08.400 on the show talk about these high active share funds 0:07:08.400 --> 0:07:10.200 being like hot sauce you put on top of a 0:07:10.280 --> 0:07:13.880 maybe a lower cost, cheap bay to portfolio, and she's 0:07:13.880 --> 0:07:17.360 certainly done that, Um, And that's what the Janis twenty 0:07:17.440 --> 0:07:19.760 did and your ramps up. I mean, when you look 0:07:19.800 --> 0:07:22.280 at a chart of the Janis twenty versus the SMP, 0:07:22.680 --> 0:07:26.720 or Cathy versus the SMP, it looks like the Swiss 0:07:26.760 --> 0:07:31.200 Alps sort of towering above like flat farmland, and the 0:07:31.240 --> 0:07:34.080 thing is not unlike what's around Denver. Actually, yeah, it 0:07:34.120 --> 0:07:38.200 look looks like Denver versus Philly. There you go. Um so, 0:07:39.000 --> 0:07:41.840 but in the Janice case, what you also live for 0:07:42.080 --> 0:07:45.120 was a correction, and I think that's what keeps coming 0:07:45.200 --> 0:07:47.360 up more and more when we when I tweet about Cathy, 0:07:47.400 --> 0:07:50.160 they're like, well this could be tough. You know, you 0:07:50.200 --> 0:07:52.640 go up that high, you come down quick? Can you 0:07:52.720 --> 0:07:57.320 walk us through the sort of that moment? I guess 0:07:57.640 --> 0:07:59.720 when the Internet bubble burst and looks like it was 0:07:59.840 --> 0:08:03.720 nine d nine um and then too late nine yeah, 0:08:03.760 --> 0:08:07.239 lasted about two years. How did that play out? Obviously 0:08:07.280 --> 0:08:10.080 if you have less stocks, it can hurt you more. Um. 0:08:10.080 --> 0:08:15.640 How did investors react? Well, there's a lot of there's 0:08:15.680 --> 0:08:19.520 a lot of unpacking that needs to happen there. Um. 0:08:19.600 --> 0:08:24.720 So the we decided it was not lost on me 0:08:24.800 --> 0:08:27.680 that there was money literally coming in over the transom. 0:08:27.800 --> 0:08:31.880 And while ARC is receiving a lot of money today, 0:08:31.920 --> 0:08:34.360 to just put that in context, in the nine in 0:08:34.400 --> 0:08:39.160 the nine late nineties, late Janice was receiving seventy cents 0:08:39.160 --> 0:08:44.359 of every dollar that was going into the mutual fund business. 0:08:46.160 --> 0:08:49.560 Think about that, seventy cents of every dollar going into 0:08:49.559 --> 0:08:53.240 the entire industry going into Jans that's kind of what 0:08:53.320 --> 0:08:57.480 like Van Guards doing that ish today. But yeah, that's 0:08:57.960 --> 0:08:59.959 that's a great static gives you an idea of how 0:09:00.160 --> 0:09:07.440 big exactly. So, um, it was not lost on me 0:09:07.520 --> 0:09:12.600 that valuations were getting rich. Um, it was not lost 0:09:12.640 --> 0:09:15.840 on us. Lost on me that, uh, there was just 0:09:15.880 --> 0:09:17.880 so much money coming in. And so I remember in 0:09:17.960 --> 0:09:22.280 April of which is kind of at the really at 0:09:22.320 --> 0:09:25.080 the height, I went to Tom Bailey, the founder of Janis, 0:09:25.080 --> 0:09:26.560 and said, you know, I think the best thing to 0:09:26.600 --> 0:09:30.000 do for the investors is to close the fund. And 0:09:30.640 --> 0:09:33.280 he looked at me and he said, as we were 0:09:33.280 --> 0:09:37.640 walking down the hallway, he said, great, let's close. Let's 0:09:37.800 --> 0:09:41.280 close it, and he goes, let's close it on Friday. 0:09:41.520 --> 0:09:43.520 And this was a Tuesday. So that's one of the 0:09:43.520 --> 0:09:45.520 other things I loved about Janis, as we were able 0:09:45.559 --> 0:09:50.920 to make very decisive decisions, were very little bureaucracy. So 0:09:50.960 --> 0:09:56.040 we closed the fund in April. It wasn't until kind 0:09:56.080 --> 0:09:58.720 of September, October, November that things started to kind of 0:09:58.720 --> 0:10:01.120 come on wound. And then actually two thousand and two 0:10:01.120 --> 0:10:07.040 thousand and one, I think and my style of investing 0:10:07.120 --> 0:10:10.440 and my commitment to investing is much like Cathy's today 0:10:10.640 --> 0:10:13.160 is that it never wavered. Even in two thousand and 0:10:13.160 --> 0:10:15.800 two thousand and one, when when things were selling off, 0:10:15.840 --> 0:10:18.480 we were still trying to invest in companies that we 0:10:18.640 --> 0:10:23.160 thought could capture the future um And if you look 0:10:23.200 --> 0:10:27.600 at the returns the investors that had, and I think 0:10:27.600 --> 0:10:31.320 this is where if I were Cathy and the and 0:10:31.400 --> 0:10:35.520 the media broadly, I would try to educate her investors 0:10:36.120 --> 0:10:39.240 to stay with it. I think she's really onto something, 0:10:39.440 --> 0:10:42.560 and but there will be a period of time, maybe 0:10:42.880 --> 0:10:46.640 through her own doing or through some macro events in 0:10:46.640 --> 0:10:48.600 the marketplace, where the markets are going to sell off 0:10:48.600 --> 0:10:52.280 pretty dramatically. And if I were encouraging people to invest 0:10:52.320 --> 0:10:55.200 in in her fund, I would say, make sure that 0:10:55.280 --> 0:10:59.679 you have got the mindset to to when that fund 0:10:59.760 --> 0:11:05.839 is or which it could be, that's when you want 0:11:05.840 --> 0:11:08.280 to step back in and recommit to the fund, because 0:11:08.320 --> 0:11:11.000 if you went I went back and looked re architected. 0:11:11.160 --> 0:11:13.360 You know, the investors that had the best performance in 0:11:13.400 --> 0:11:16.360 the in the Janis twenty fund, it's the guys that 0:11:16.440 --> 0:11:19.480 continue to invest, either through a dollar cost averaging mechanism 0:11:19.720 --> 0:11:22.560 or just an active decision to buy it when they 0:11:22.559 --> 0:11:26.680 were down, believing that hey we had a process that 0:11:27.200 --> 0:11:31.959 you know, we didn't immediately become less intelligent because the 0:11:32.000 --> 0:11:34.480 fund was down. That we stayed with it. We stuck 0:11:34.480 --> 0:11:36.960 to our knitting. And I think that a lot of 0:11:38.360 --> 0:11:41.040 there needs to be a lot of education to her 0:11:41.080 --> 0:11:43.880 shareholder base that, hey, the future from A to B 0:11:44.080 --> 0:11:46.400 is not a straight line, and to be able to 0:11:46.920 --> 0:11:51.080 have the gumption to step in when this thing trades 0:11:51.120 --> 0:11:54.200 off from time to time. So one difference with UM, 0:11:54.880 --> 0:11:57.960 with Kathy and and Arc is that you know, she's 0:11:58.040 --> 0:12:01.280 unable to close because it's an e t F, whereas 0:12:01.480 --> 0:12:04.320 you had a mutual funds. So talk about that difference 0:12:04.320 --> 0:12:06.760 in what advice you'd have on on on that side 0:12:06.800 --> 0:12:11.000 of the question. You know, yeah, that's a very good observation. 0:12:11.200 --> 0:12:14.680 And I don't know what the answer is. We closed 0:12:15.080 --> 0:12:20.800 Janice twenty and UH to existing investors in April. We 0:12:20.840 --> 0:12:26.439 had another side UH fund that was run alongside it, 0:12:26.520 --> 0:12:30.600 the Janice forty fund. But between the two, you know, 0:12:30.640 --> 0:12:33.960 they had about forty billion dollars in assets. And I 0:12:34.000 --> 0:12:38.000 really felt that that at that time, given the depth 0:12:38.040 --> 0:12:40.679 of the markets and liquidity and then in the market 0:12:40.720 --> 0:12:44.160 capitalizations of the company, I really felt that you know 0:12:44.240 --> 0:12:47.520 that was kind of the top end, and I think 0:12:47.559 --> 0:12:52.079 the markets are deeper. Her portfolio, her group of portfolio 0:12:52.160 --> 0:12:54.199 offerings is wider. I think he had six or seven 0:12:54.200 --> 0:13:00.320 funds as opposed to to so UM. I think that 0:13:00.320 --> 0:13:03.480 that is probably the one thing that she is going 0:13:03.520 --> 0:13:06.560 to have to figure out a way to navigate is size. 0:13:06.559 --> 0:13:10.319 And I don't know if it's fifty billion dollars is 0:13:10.320 --> 0:13:13.400 a number, or or a hundred or a hundred and fifty, 0:13:13.480 --> 0:13:18.280 but there will be a point where it becomes where 0:13:18.360 --> 0:13:21.760 size will become kind of her enemy. So I want 0:13:21.760 --> 0:13:25.440 to actually just step back and compare uh, the moment 0:13:25.480 --> 0:13:28.160 that you lived through back then with this moment. How 0:13:28.480 --> 0:13:30.760 I mean, how do you feel about it now? You're 0:13:30.840 --> 0:13:33.200 you're an investor, you're still in the markets with your 0:13:33.240 --> 0:13:36.880 family office. How do you feel about where we are 0:13:36.960 --> 0:13:42.520 now versus then? Well, certainly, you know, history doesn't repeat itself, 0:13:42.520 --> 0:13:46.720 but it rhymes. I think it's very easy to point 0:13:46.720 --> 0:13:49.640 to some of these valuations that we're that are kind 0:13:49.679 --> 0:13:55.400 of head scratching um using traditional yardsticks. But if you 0:13:55.440 --> 0:13:58.920 look at some of the total addressable markets that a 0:13:59.000 --> 0:14:03.360 lot of these high you companies are trying to address, UM, 0:14:03.400 --> 0:14:07.280 you know, there's still a lot of headroom in the opportunity. 0:14:07.320 --> 0:14:10.160 I think we're just scratching the surface in some of 0:14:10.160 --> 0:14:16.000 this DNA sequencing, uh, certainly cloud computing and big data. 0:14:16.520 --> 0:14:20.320 I think we're still early days there. Um So, I 0:14:20.360 --> 0:14:24.080 think that she's on to you know, five four or 0:14:24.080 --> 0:14:27.000 five broad trends, and I think she has thirteen or 0:14:27.000 --> 0:14:31.480 fourteen technologies that sort of embody that. Um So, I 0:14:32.040 --> 0:14:34.960 think we're and this and then with COVID, this whole 0:14:35.520 --> 0:14:39.280 digitalization phenomenon has been pulled forward. So I've talked to 0:14:39.320 --> 0:14:40.920 a bunch of c e O s and they said, yeah, 0:14:40.960 --> 0:14:43.960 we're we're operating today where we thought we would be 0:14:44.000 --> 0:14:46.520 four or five years ago. And so then you've got 0:14:46.560 --> 0:14:50.840 this whole generation of computer literacy. Uh, my kids are 0:14:50.920 --> 0:14:53.960 much more a depth than I am at using some 0:14:54.040 --> 0:14:56.640 of these technologies. So you've got the convergence of lots 0:14:56.680 --> 0:15:01.920 of very bullish long term mac row factors. Um but 0:15:01.960 --> 0:15:04.320 it won't be a straight line all of a sudden. 0:15:04.680 --> 0:15:11.280 You know, we've got a democratically controlled how government and uh, 0:15:11.560 --> 0:15:13.840 you know there's a regulatory or regime that's going to 0:15:13.920 --> 0:15:18.200 be thought about a lot differently than it was yesterday. Um, 0:15:18.360 --> 0:15:21.640 you've got financial markets. You know, got the ten years 0:15:21.720 --> 0:15:26.160 now robustly through one, which I don't think is in 0:15:26.240 --> 0:15:28.160 and of itself a problem. But what happens if it 0:15:28.200 --> 0:15:30.840 goes to one and a half or two? And how 0:15:30.880 --> 0:15:35.640 does that math re engineer itself in terms of valuations. 0:15:35.720 --> 0:15:37.560 So there can be a lot of things that happen 0:15:37.600 --> 0:15:41.720 on a macro level that could compress these valuations. Um. 0:15:41.760 --> 0:15:45.320 Which is why I think that if I were giving 0:15:45.360 --> 0:15:48.320 advice to people broadly in the marketplace, it would be 0:15:49.040 --> 0:15:52.200 if you're and you're investing in in concentrated funds that 0:15:52.240 --> 0:15:55.200 are investing in the future that have had these huge runs, 0:15:55.240 --> 0:15:58.800 just be prepared, don't get shaken out. If the fund 0:15:58.840 --> 0:16:02.080 is down, that's when you want to buy more. And 0:16:02.120 --> 0:16:04.080 if I look back at the Janis twenty fund, the 0:16:04.120 --> 0:16:06.880 people that had the best returns are the people that 0:16:06.960 --> 0:16:11.360 stepped in when the fund was down and I was 0:16:11.400 --> 0:16:15.840 being called, you know, an idiot, the village idiot, which 0:16:15.880 --> 0:16:19.440 I'm I'm good with. I've been called worse. Um, but 0:16:20.400 --> 0:16:23.040 that's when you really want to step up. So you 0:16:23.040 --> 0:16:26.440 want to size the position going in and give yourself 0:16:26.520 --> 0:16:31.600 some margin of safety so that when opportunities present themselves 0:16:31.880 --> 0:16:34.360 to be able to step in and buy more. And 0:16:34.400 --> 0:16:37.440 you know when you talk to Kathy and see her 0:16:37.480 --> 0:16:41.200 online crowdsourcing research, she's got a young group of analysts. 0:16:41.920 --> 0:16:44.240 It really she's having a good time doing this too. 0:16:44.280 --> 0:16:48.040 And I want to maybe compare her stock picking process 0:16:48.960 --> 0:16:51.600 to yours. And obviously this is what none of the 0:16:51.640 --> 0:16:54.440 rest of the E t F industry can discuss because 0:16:54.440 --> 0:16:57.160 they're all rules based indexes that are once you design them, 0:16:57.160 --> 0:17:01.680 it's over. UM talk about this stock picking process and 0:17:01.840 --> 0:17:05.560 maybe how much of the success is picking those stocks, 0:17:06.080 --> 0:17:08.960 being concentrated or just having a hot hand, and how 0:17:09.000 --> 0:17:12.679 that all kind of comes together. Right. One of the 0:17:12.760 --> 0:17:17.200 things I think that to be successful running a concentrated fund, 0:17:17.240 --> 0:17:19.240 you really have to invest with a point of view 0:17:19.840 --> 0:17:24.600 and and have strong convictions. UM. And I never had 0:17:24.720 --> 0:17:28.159 any interest in investing in my fifty seventh favorite idea. 0:17:28.680 --> 0:17:30.920 And I remember one time and so people you saw 0:17:31.040 --> 0:17:32.720 asked me all the time, how do I get a 0:17:32.800 --> 0:17:34.680 name into the Janis twenty fund? And I said, It's 0:17:34.760 --> 0:17:36.960 very simple. I said, during the course of the year, 0:17:37.000 --> 0:17:40.320 you'll be traveling around the country, meeting with management teams 0:17:40.520 --> 0:17:43.240 or seeing a product or there will be something that 0:17:43.280 --> 0:17:46.960 crystallizes in your mind that this is a fantastic investment. 0:17:47.280 --> 0:17:50.400 And I said, I don't care if it is Christmas Eve, 0:17:50.800 --> 0:17:52.880 I don't care if it's my birthday, I don't care 0:17:52.920 --> 0:17:56.400 if it's Easter, Sunday, whatever. Pick up the phone, email 0:17:56.480 --> 0:18:00.479 me whatever, and get my attention. UM. And so I 0:18:00.520 --> 0:18:05.919 remember very specifically, a young analyst was walking with me 0:18:06.000 --> 0:18:07.760 down the hallway and he says, I've I've got it. 0:18:07.800 --> 0:18:10.280 I've seen a company that I think it fits the 0:18:10.320 --> 0:18:14.000 Janis twenty fund criteria that threshold. I said, great. So 0:18:14.359 --> 0:18:16.760 as we walked from the fifth floor to the sixth floor, 0:18:16.800 --> 0:18:21.439 he described the company what it was doing, um, and 0:18:21.520 --> 0:18:23.760 it reminded me of a company actually from about ten 0:18:23.840 --> 0:18:26.160 or fifteen years earlier. And by the time we got 0:18:26.200 --> 0:18:30.160 to the sixth floor, which took us seconds, I said, 0:18:30.160 --> 0:18:32.640 we're gonna own ten percent of this company as fast 0:18:32.680 --> 0:18:35.080 as we can buy the shares. And one of the 0:18:35.119 --> 0:18:37.840 criteria I I said that they that I used to 0:18:38.280 --> 0:18:43.160 some of the younger analysts. I would say, Okay, how 0:18:43.280 --> 0:18:46.320 much of your bonus are we going to put into 0:18:46.359 --> 0:18:50.240 this fund? How convicted are you in this idea? And 0:18:50.320 --> 0:18:52.159 this kid gave me one of the great answers of 0:18:52.160 --> 0:18:58.679 all time, and he said, I think about think about that. 0:18:59.400 --> 0:19:03.439 So we knew we were paying him X. So he 0:19:03.560 --> 0:19:08.320 basically so we and we ended up paying him. He 0:19:08.359 --> 0:19:11.639 gets more money, and he gets the stock in the 0:19:11.640 --> 0:19:15.080 Porto one of the great stocks, and when it's still 0:19:15.160 --> 0:19:17.800 one of the great stocks after fifteen years, and that's 0:19:17.800 --> 0:19:22.240 intuitive surgical. So this was intuitive surgical. If you reverse 0:19:22.800 --> 0:19:26.639 engineer the splits, etcetera, etcetera, the car cost basis and 0:19:26.720 --> 0:19:31.600 this would be low single low, low single digit. So 0:19:31.880 --> 0:19:34.040 that to me was that to me is the is 0:19:34.080 --> 0:19:39.800 the threshold, is is having the conviction. You know, I 0:19:39.800 --> 0:19:41.119 if you look at the if you kind of reverse 0:19:41.160 --> 0:19:44.320 engineer the SMP five hundred over the years, it's about 0:19:44.359 --> 0:19:49.040 seven percent of the names that that provide most of 0:19:49.119 --> 0:19:53.680 the outperformance. So I always felt that if we could 0:19:53.720 --> 0:19:57.240 find those names and with our research capability and the 0:19:57.320 --> 0:20:00.480 judgment of the people at the shop and some luck, 0:20:00.680 --> 0:20:07.480 luck pays a plays a. Um. Luck, the more honest 0:20:07.520 --> 0:20:09.760 you are, the more real, the more you realize that 0:20:09.880 --> 0:20:14.280 luck does play a part, play a key role. But UM, 0:20:14.320 --> 0:20:15.800 I would like to think that we had some pretty 0:20:15.800 --> 0:20:18.919 good judgment and being able to Eric. We talked the 0:20:18.920 --> 0:20:22.360 other day about really spending time trying to understand the 0:20:22.400 --> 0:20:25.840 fabric of the company, not just the exos and nose 0:20:25.880 --> 0:20:28.080 of the balance sheet and income statement, but really understand 0:20:28.119 --> 0:20:30.680 the real fabric. Is this a management team that can 0:20:30.720 --> 0:20:34.320 continue to grow and continue to capture the opportunity that's 0:20:34.359 --> 0:20:39.160 in front of them. And so we really I think 0:20:39.200 --> 0:20:41.000 we did a good job, and I think Kathy is 0:20:41.040 --> 0:20:44.159 doing a job of making those judgments because at the 0:20:44.240 --> 0:20:45.600 end of the day, that's what it comes down to, 0:20:45.680 --> 0:20:48.000 his judgment. Now, you talked about not wanting to buy 0:20:48.000 --> 0:20:50.800 the fife best idea you had or you know, as 0:20:50.840 --> 0:20:52.439 you go down the list, it's nice to have just 0:20:52.600 --> 0:20:56.080 your best ideas. A lot of funds I really can't 0:20:56.119 --> 0:20:58.560 do that, like, and there's a lot of active funds 0:20:58.560 --> 0:21:01.320 who I know, for a factor, sort of watching Cathy 0:21:01.359 --> 0:21:03.920 and all her success and they're probably getting a little 0:21:03.960 --> 0:21:06.320 jealous or wondering how they can fit into the new world, 0:21:06.760 --> 0:21:11.280 especially as five billion leaves around there leaves active mutual 0:21:11.280 --> 0:21:14.159 funds last year to steady drumbeat of outflows, especially on 0:21:14.160 --> 0:21:17.640 the equity side. What are your thoughts on on the 0:21:18.200 --> 0:21:21.679 legacy active and that traditional more closet indexing active and 0:21:21.720 --> 0:21:25.760 how it can sort of evolve into the future as 0:21:25.800 --> 0:21:28.520 passive becomes bigger. And then on the other side, you've 0:21:28.560 --> 0:21:31.800 got this barbell where the high active share gets success. 0:21:32.359 --> 0:21:34.240 But the middle seems like a tough spot to be. 0:21:36.359 --> 0:21:39.640 The middle is always a tough spot to be. Um. 0:21:39.680 --> 0:21:42.240 You know, I don't know, really, UM. I think that 0:21:42.280 --> 0:21:44.360 a lot of the mutual fund companies, if I were 0:21:44.359 --> 0:21:48.479 looking at them critically across the actively, I think they 0:21:48.520 --> 0:21:51.520 have too many funds. I think they have way too 0:21:51.520 --> 0:21:53.520 many funds. You know, I don't know how and this 0:21:53.680 --> 0:21:56.200 is not you know, if you look at key ro 0:21:56.359 --> 0:22:00.800 Price or Fidelity, you know, fifty seventy any funds. I mean, 0:22:00.840 --> 0:22:04.560 that's a lot of actively managed and I don't think 0:22:04.600 --> 0:22:09.879 there's you know, talented managers. I think that there's seventy 0:22:10.560 --> 0:22:14.679 managers in the mutual funds actively traded mutual funds in 0:22:14.680 --> 0:22:21.600 the country. They're not good portfolio managers. There are I mean, 0:22:22.280 --> 0:22:25.720 to my way of thinking, there's a dozen, but there 0:22:25.720 --> 0:22:29.000 are there. You know, let's say it's a hundred. Okay, 0:22:29.040 --> 0:22:31.919 So if I were running some of the some of 0:22:31.920 --> 0:22:35.679 these big actively managed fund complexes, I would start combining 0:22:35.720 --> 0:22:40.080 funds and make it simpler for the consumer to understand. 0:22:40.240 --> 0:22:44.840 And then in terms of concentration, I think it takes 0:22:44.840 --> 0:22:50.000 a special sort of DNA to run a concentrated fund. 0:22:50.600 --> 0:22:53.240 So one of the things that we were very good 0:22:53.280 --> 0:22:56.680 at it Janice is being able to match people with 0:22:57.160 --> 0:23:00.400 their natural investment style with the fund that they were 0:23:00.440 --> 0:23:04.600 responsible to run. So the people that we were had 0:23:04.680 --> 0:23:07.640 running our biotech funds, etcetera, where they were not only 0:23:08.720 --> 0:23:13.119 had extraordinary academic backgrounds, it said they were passionate about biotech. 0:23:13.680 --> 0:23:18.159 You know, Uh, I'm managing money today exactly the way 0:23:18.200 --> 0:23:20.040 I managed money in the Janis twenty fund. When I 0:23:20.119 --> 0:23:23.399 ran the twenty fund, I had of my assets and 0:23:23.520 --> 0:23:26.320 my investible assets in the fund. I ran it exactly 0:23:26.359 --> 0:23:29.800 the way I would run my own money. So to me, 0:23:30.160 --> 0:23:33.000 I would if I were running an actively trade a 0:23:33.080 --> 0:23:35.320 mutual fund shop, I would try to narrow the number 0:23:35.320 --> 0:23:38.520 of offerings, make them simpler to understand, and I would 0:23:38.520 --> 0:23:42.880 try to to really do a good job of matching 0:23:42.920 --> 0:23:46.800 people into those funds that are that have a natural 0:23:46.880 --> 0:23:51.000 inclination to whatever the criteria of that fund is um 0:23:51.080 --> 0:23:55.080 and invest. And then from there they ended up, they'll 0:23:55.119 --> 0:23:58.040 end up investing naturally with a with a very convicted 0:23:58.200 --> 0:24:01.760 point of view because you've got everything kind lined up. Um. 0:24:01.800 --> 0:24:03.840 I think that it's become more of a little bit 0:24:03.840 --> 0:24:06.639