0:09

Hey,

0:09

everybody. This is Phil Town.

0:11

Hi. This is Danielle Town.

0:12

Welcome to the InvestED Podcast. We're

0:14

excited that you're here. and We're here for

0:17

another wonderful

0:19

podcast about investing the

0:21

way you're supposed to do it. We

0:24

are. But they tell you in high

0:25

school. separate at the beginning. Gosh.

0:27

Yeah. Right. You shouldn't invest

0:29

the way they tell you in high school. And again, didn't

0:31

even tell you in high school. Okay. and you shouldn't

0:34

invest the way they teach you in college. Definitely

0:36

not that.

0:37

And you shouldn't invest the way your financial

0:39

adviser tells you because that is a way

0:41

to just great, greatly mediocre returns.

0:43

You should invest

0:45

the

0:46

way the best investors in the world

0:48

do

0:48

it. Which we are trying to decipher.

0:52

We will decide. Understood. We've been

0:54

deciphering and we'll

0:56

keep deciphering because it's really

0:58

fun. We love talking about this stuff. Totally.

1:00

And I love having my daughter here with me,

1:02

although she's in Zurich.

1:04

That's me, Dad. You're talking

1:06

to me.

1:07

I know. I'm just You talk to the

1:09

to the listener. I'm

1:13

so excited that you're feeling better.

1:15

You're feeling better. You're getting past

1:17

You're doing a little bit better. I don't like

1:19

to say too much because it

1:21

usually goes down once I start

1:23

feeling better. So It's

1:25

but it's two steps forward, honey. It's two steps.

1:28

It's Then one. And then two steps forward

1:30

and one and a half steps

1:32

back. Oh. Kinda. But I think

1:34

I think it's getting better better bigger

1:36

steps.

1:36

Yeah. So back is hard. So

1:39

it's a good It's a ton of movement

1:41

right now. Stocks. Oh my gosh. Yes.

1:44

Yes. So

1:46

last

1:46

time we were talking about exits

1:50

and trying to, like, get

1:53

my mind wrapped around

1:54

this idea that you

1:57

threw at me that

1:59

maybe buying and selling

2:03

out of a good company that is

2:05

still a good company. might

2:07

be the right option. And we've

2:10

been

2:11

I've been trying to get my

2:13

arms around that

2:15

Because -- Yes. -- I very much taken

2:20

into heart that that once

2:22

I find a wonderful company. And as long

2:24

as nothing's changed and I still think it's

2:26

wonderful, I stick with

2:28

it. but you are

2:30

changing my mind a little bit

2:32

on that one. Or as we

2:35

put the last time, maybe

2:38

there's third option.

2:42

Or

2:42

there's two

2:43

other options. I don't know. Mhmm. I don't

2:45

know how options I had in the beginning, whatever.

2:48

Three options. Alright.

2:51

I'm gonna repeat something since you're muddy in

2:53

the water here. Okay. Yes.

2:56

All these options is the

2:58

the most important thing you can do

3:00

is to buy a wonderful business when

3:02

it's on sale. If

3:04

you do that, then

3:06

the rest of this is

3:07

just sort of

3:10

trying to maximize your overall return.

3:13

your overall return is gonna be better

3:15

by far

3:17

than

3:18

buying a

3:19

pile of companies that you're financial

3:21

advisers tell you to do a whole bunch of ETFs

3:23

and diversify all over everything. If

3:25

you can just follow along with

3:28

what Warren

3:29

Buffett's been teaching us for sixty years,

3:31

you're gonna do better, I believe. And so

3:34

we we wanna buy a wonderful business. We

3:36

wanna buy it on sale. Alright? That's that's

3:38

the basic That's why we don't spend a lot of

3:40

time talking about when do we sell this thing.

3:42

But I will admit

3:44

selling can have a major

3:46

impact on what the overall rate of

3:48

return is. Yeah. I have

3:50

continually throughout my career sold

3:53

too soon. it

3:55

is it is if I have a major fault,

3:57

that's it. That's the major fault.

3:59

And

3:59

I'm really not gonna blame myself for

4:02

it. Honestly, I I mean,

4:04

The last eight years have been ridiculous in

4:06

terms of what the market's doing relative to

4:09

my entire career and

4:11

the careers of everyone I know before

4:13

me. I mean, we can go back a hundred

4:15

and forty years to to try to find a market like

4:17

the one we've had in the last twelve years, and you won't

4:19

find one. Maybe in

4:21

the roaring twenties kind of been even

4:23

then

4:24

not even then. I mean, just as an example, I don't know

4:26

if you knew this, Danielle, but the PE ratio in

4:28

nineteen twenty nine on the S and P five

4:30

hundred

4:31

was

4:32

fourteen. Mhmm.

4:33

Crashed. Wait.

4:35

When it what do you mean when it

4:38

crashed? when

4:38

it crashed. Like, yeah. Like, that was the high --

4:40

Right. -- before it crashed. Yeah.

4:43

A

4:43

fourteen PE, which was just the historical

4:45

average. Right.

4:46

Our our our

4:49

our sort of

4:50

ten year average peas right now are

4:52

running thirty -- Yeah.

4:54

-- something like that. Why is that? Gosh. It's

4:55

so interesting though to think why that

4:58

might be. I bet there's some

4:59

really good articles about there about

5:01

why that would be. But the thing that comes

5:03

straight to mind is the

5:05

difference in disclosure requirements between

5:08

now and then. Like, think

5:10

back then. Companies

5:12

didn't have to file things

5:13

the way they do

5:15

now, they didn't have to disclose their

5:16

financials the way they do now. I don't

5:18

even know if GAAP existed back then,

5:21

generally accepted accounting principles. like,

5:26

the risk of buying

5:28

a public security was so

5:30

much higher. than

5:32

it is now just based

5:33

on the information asymmetry.

5:37

It's a while to think about. I

5:39

know I I would I I really don't

5:42

wanna agree with you, but I might have

5:44

to. because I just

5:46

really don't like the regulatory authority.

5:49

that was put in place in the nineteen thirties.

5:52

But maybe maybe I've

5:54

gotta admit that it's valuable. It's

5:56

just that you just see

5:58

that, you know,

5:59

we use only

6:02

only a few years ago, within the last twenty

6:04

years, we've had twice as

6:06

many public companies as we do now.

6:08

We're down to about, you know, we're

6:10

down to about half of where we were just from

6:12

two thousand seven. And so

6:14

and that's because of regulatory overreach

6:17

in my view. I mean,

6:19

Pete, companies don't wanna go public because

6:21

of so much exposure that they have to

6:23

the regulator.

6:23

That's absolutely correct. That's, I would

6:25

say, half of it or maybe more little more

6:27

than half. And then the I think the other component of

6:30

that is the incredible rise

6:32

of private money going

6:34

into private companies of

6:36

private equity and venture

6:37

capital going into private companies. that

6:40

has been a huge change

6:42

on the private markets. It

6:44

just was not like that before.

6:47

Agreed.

6:48

Yeah. I I agree. That that has been

6:50

a huge change. And that huge

6:52

change is on the back of the

6:54

United States having the largest venture capital

6:56

pool of any country in the world

6:58

by far, bigger than all of

7:01

Europe, bigger than all of China. I

7:03

mean, it is one of the real backbones

7:05

of American enterprise. Absolutely. We

7:07

have capital, and

7:08

you can go after it. If you're

7:10

if you're in Europe, I mean, a lot of people point to

7:13

Europe as being, you know,

7:14

a better political regimen or something. But

7:16

if you're in Europe, you're living in a world

7:18

of

7:19

really kind

7:21

of hidden aristocracy. I mean,

7:23

the the families that

7:25

have the money marry their children to the

7:27

families that have the money and

7:29

keep the money in the aristocracy. And

7:32

if you wanna raise money for an for

7:34

a venture,

7:35

good luck. I

7:37

mean, the banks aren't gonna do any there's almost

7:39

no no real venture capital in Europe, like

7:41

there is in the United States. But

7:43

banks aren't really venture capitalists. No.

7:45

So Yeah.

7:46

The banks that I think it's it's a

7:48

little too broad to say Europe because every

7:50

country has very different

7:52

laws and cultures around

7:54

risk taking and entrepreneurship

7:55

and venture capital. In

7:58

some countries, I would say your character

7:59

your characterization is

8:02

I don't

8:02

know about the aristocracy, Marion

8:05

aristocracy, but generally the banks

8:07

are quite conservative. But

8:09

some European countries

8:11

are really trying to become entrepreneurial

8:14

and attract businesses and attract

8:16

entrepreneurs like Portugal is doing

8:18

that. Spain is doing that. The UK

8:20

has been doing that for years

8:22

and been extraordinarily successful

8:25

the accelerators in London especially

8:28

around financial companies are

8:30

highly developed. Mhmm. That's

8:33

pretty cool. The

8:34

Netherlands has been really have been

8:37

really trying to attract businesses

8:38

and entrepreneurs. It's relatively

8:40

easy to get a visa and move So

8:43

it's interesting the way different

8:45

countries have approached

8:47

the issue. But

8:49

in general, I mean, yeah, the US has

8:51

twenty, thirty years. on

8:53

all these other countries.

8:55

I mean, there's some great books out

8:57

there about very

8:59

successful entrepreneurial

9:02

countries like Israel

9:04

is a

9:05

massive case study example. There's

9:08

probably like ten books about real and

9:10

entrepreneurship and how they've built up their

9:13

incredible culture. And

9:15

then Chile has actually

9:17

done. surprisingly.

9:18

Well, they've really been trying and

9:20

how successful they've been, but they've

9:22

been really trying. And then, like I said,

9:24

various countries in Europe. So

9:27

And then,

9:27

Asian countries

9:28

are starting to do quite

9:29

well. So it's obvious

9:32

the success the US has

9:34

had with the

9:36

looser

9:36

regulatory requirements around

9:39

smaller investments into high

9:41

the growth

9:42

early stage companies.

9:45

and other countries

9:47

are trying to emulate that success.

9:49

But because the US started it so much

9:51

earlier and invented and

9:53

it's so

9:54

deepen our culture at this point and

9:56

maybe always has been because we're a

9:58

country of

9:59

immigrants who are by definition

10:02

risk takers. I

10:05

think we

10:08

have it in our DNA, if you want to say

10:10

that, if I can say that in a way that

10:12

nobody else does. I

10:14

would

10:15

I'm I'm gonna I'm gonna urge

10:17

all of you listeners to do

10:20

something

10:20

that might really help a

10:22

few of you become

10:25

very rich. So this

10:27

isn't this isn't gonna work for everybody, but it's

10:29

gonna help a few of you. If

10:31

everybody were to write I mean, there's thousands of

10:33

you listening to this podcast. If

10:36

if all of you wrote a letter

10:39

to your secretary of

10:41

state,

10:42

and say, we

10:44

demand

10:45

that you allow small

10:48

fund managers the

10:50

right to take a participation fee.

10:52

Well,

10:52

that is a different completely

10:55

-- Uh-huh. -- I know. Hold on. But I just want

10:57

to amend up in the middle of pitch. It's

10:59

completely different than what we've just been talking

11:01

about. Wait. Let

11:02

me finish. You've you've

11:04

said this like ten times on here.

11:06

Go ahead. Oh, well, I'm gonna out

11:08

of four hundred, almost five.

11:10

Yes. I'm gonna say it again. Yeah.

11:12

Alright. Now now you made me start all the

11:14

way over. write your

11:16

Secretary of State a

11:17

letter

11:18

and ask that they

11:20

remove the regulations

11:23

prohibiting you

11:25

from

11:25

starting a fund and charging a

11:28

participation fee of twenty or twenty

11:30

five percent of profits.

11:32

for unaccredited investors.

11:34

You're gonna have a fund of

11:36

unaccredited investors you

11:38

wanna take a participation fee, you

11:40

wanna be able to have a percentage of

11:43

profits. It is such

11:46

bull

11:47

that these regulators have stopped you

11:49

from doing that. This is how

11:51

Warren Buffett started. It's how my

11:53

teacher started. It's how I started And

11:55

now the regulation over the last forty

11:57

years has just become such

11:59

a

11:59

overarching big brother

12:02

absurdity that you are

12:04

not gonna be allowed to do that in most

12:06

states. And all

12:08

it is

12:08

is some decision by a state

12:11

you

12:11

know, Secretary of State type

12:14

people to just stop you from doing

12:16

it. So the point of that is and the reason I

12:18

brought it up in this context is

12:20

that

12:21

That used to be a way

12:23

for very small investors who are

12:25

unaccredited. That means you don't have two

12:27

million dollars -- Mhmm. -- unqualified or a

12:29

million dollars. you know,

12:30

you've only got fifty thousand dollars or something.

12:33

That used

12:33

to be a way for small investors to have an opportunity

12:36

to have someone really

12:38

good, manage some money for them,

12:40

and do really good returns with it potentially.

12:42

And now they've

12:43

taken that away,

12:45

under that notion that I disagree

12:47

with completely that

12:48

says that, oh, it's just too much of

12:50

a risk for the small investor, the

12:53

one with no money, to

12:55

have a fund manager who might be

12:57

too

12:57

aggressive because he's making a participation

13:00

fee.

13:01

versus taking a one

13:03

percent fee of someone. So they're fine with

13:05

you. Fund managers taking a one percent fee,

13:07

but the problem is, of course, you can't make

13:09

a living on

13:10

a one percent fee until

13:12

you have a huge pile of money.

13:15

The high interest dollars will make you a

13:17

thousand dollars a year. The cultural

13:18

difference there as well. I didn't know this

13:20

until well, I

13:21

was gonna say recently, but it must have been before I

13:23

got sick. So let's say two two or three

13:25

years ago. in

13:28

the

13:28

UK, there's a

13:30

really strong cultural

13:32

bias against

13:35

fund

13:35

managers, financial people

13:37

taking a participation fee.

13:40

They view that as being

13:42

like an incredibly massive

13:46

red flag being waved

13:48

about this person.

13:49

Isn't that Investing? like,

13:51

as somebody who came

13:53

up with

13:54

with venture

13:57

capital being my clients as

13:59

a lawyer.

13:59

Like, everybody

14:00

takes a part of like, that's how venture

14:03

capital works. you take a participation fee. And it just

14:05

seemed so, like, obvious and

14:07

natural to me. And so when I was

14:08

talking to these people who were

14:11

British investors, And

14:13

they were just, you know, telling me about this,

14:16

like, view generally

14:18

in the UK and that

14:20

if you did that

14:23

like people

14:23

would just not even talk to you, like people wouldn't

14:26

be interested in investing at

14:28

all. It's so interesting to me

14:30

that massive difference. I

14:32

don't know if that's changed much.

14:34

Maybe it has been changing,

14:35

but that was just a few years ago

14:37

that I heard that from some very well

14:39

connected people who really who really

14:41

know the culture?

14:44

Man, I mean, you

14:47

think

14:47

about what that one little regulatory

14:49

change does. Where the regulators Of course, they

14:51

don't know. What that They

14:53

actually know a lot. They actually know

14:56

a lot. and they get They do

14:58

that. Because they

14:59

view it as risky. The same reason that people

15:01

in the UK view it as risky. Because

15:05

you have no downside and a huge

15:07

upside. That's

15:08

why. So,

15:11

yeah, It's just it's just a nobody's

15:13

really figured it's kind of like democracy. Like, nobody's

15:15

really figured out a better way. And

15:19

It seems to work decently well most

15:21

of the time, and

15:22

sometimes it doesn't.

15:24

So, should we

15:26

talk about tech stocks?

15:29

Yeah. Sure. And and so let's

15:31

dive in here real quick. Text

15:34

stocks. We were gonna talk about text stocks

15:36

in the context whether they were really investable

15:38

or not, particularly

15:40

because they are leading the charge

15:42

in going on sale

15:45

Google is arguably on sale,

15:47

potentially Alphabet, arguably.

15:50

Apple,

15:50

not really. Meta,

15:53

arguably. is getting down in the on

15:55

sale territory. And

15:57

these are companies that are they just

15:59

make

16:00

massive cash flow. It's just

16:02

incredible. The amount of billions

16:05

of dollars of free cash flow that

16:07

they deliver. Speaking

16:10

about basically

16:11

Google,

16:13

meta,

16:14

Microsoft, Apple, the

16:17

four that jump into my mind,

16:19

that are really cash flow engines.

16:22

Facebook doesn't

16:24

produce cash flow so much, although they're starting to,

16:26

they're expecting to do about a billion

16:28

dollars this year. but that's not even remotely

16:30

in the ballpark of what these other guys do. I think

16:32

Apple is at a hundred and eleven

16:34

billion free cash

16:36

flow. Microsoft's like ninety four

16:38

billion dollars of free cash flow. So,

16:40

you know, these guys

16:42

are monster cash machines, and that's,

16:44

of course, what we look for. So

16:47

why

16:47

wouldn't we wanna jump on the back of

16:49

one of these fabulous earth

16:52

shaking technology companies?

16:54

Right? Well, can

16:55

we talk about them in the context of exits?

16:57

because that's what I'm curious about.

17:00

Oh,

17:00

wow. Okay?

17:03

Because that's

17:03

what we were talking about last time.

17:06

Alright. So But you wanna talk

17:08

about maybe he's best seen in them?

17:11

Yeah. Let's say

17:11

you buy some Google. Okay. Well,

17:13

I

17:13

mean, to me, what's inter we can talk

17:15

about investing in them. I'm just curious

17:18

because probably a lot of people

17:19

already own these companies. And

17:23

since we were talking about when

17:26

do you get out basically? Was

17:28

essentially the crux of the conversation.

17:30

And

17:31

do you get

17:33

out of a technology company? Was it the

17:36

crux of the conversation? Okay?

17:38

No. We I mean,

17:39

we're talking about these three or

17:42

four exits, whatever. Right? The

17:44

the the three being that

17:46

you you have a choice of buying and holding

17:48

forever. Yeah. That's where you're sitting

17:51

and Warren Buffett's sitting there pretty

17:53

much. And monger just

17:56

sitting and holding great companies.

17:58

Then we talked about

17:59

why. I don't know why you're doing it, but I

18:02

can tell you why Buffet and

18:04

Mongia are doing it because they didn't used to do

18:06

that. And they didn't make

18:08

their fortune doing that. They made

18:10

their fortune buying and then selling them Timing

18:12

got anywhere near intrinsic value and moving on

18:14

to the next one. But as Charlie and Warren

18:16

have gotten a huger and huger has become

18:18

more difficult for them to have the flexibility to

18:20

get out. You can't just sell out of ten

18:22

percent of the entire shares of Coca

18:25

Cola and have the stock be okay.

18:27

Mhmm. So they they're much

18:29

less flexible much less

18:31

nimble. But, you

18:34

know,

18:34

arguably, it's a great investing

18:36

strategy. I mean, ideally, you just

18:38

that company continue to produce a lot of

18:41

money over time. And it's certainly been a great

18:43

strategy for the last ten years. So

18:45

hard to argue with that one. Then

18:47

there's the one that I tend to do, which

18:49

is buy and sell when it gets to

18:51

intrinsic value, a

18:53

very early Warren Buffett

18:56

Investing. and hold cash

18:58

or and buy something else.

19:01

And

19:01

hold cash. Hold cash. Alright.

19:03

And then just wait for the next

19:06

opportunity. And then the third

19:08

option is to buy great

19:10

companies and then when they're on sale and

19:13

then sell them only

19:15

when you have an opportunity to

19:17

buy something else. So you'd

19:19

look through your portfolio and say,

19:21

well, this one's not growing as fast as it

19:23

used to maybe I'll sell it now because

19:25

I can buy ABC company. Yeah. Exactly.

19:27

And it's really on sale. Mhmm.

19:29

And that's

19:30

a little bit of you know, a merger

19:32

of the the first one and the third one. Right?

19:34

So the first one and the second one. So

19:36

you you basically have got

19:39

some

19:39

of the value of holding long term,

19:42

but you also have the value of

19:44

keeping the velocity high of

19:46

your money working as hard as

19:48

it can.

19:48

Yeah. And the risk that you'll

19:51

hold into a big downturn,

19:53

and then you've

19:55

lost the the gains that

19:57

were there. There's the

19:58

rub. Yeah. And and the reason

19:59

that that's a big big rub

20:02

is because we're not

20:04

good at

20:04

at market timing at

20:07

all.

20:07

We don't know how to do that.

20:09

what

20:11

we'd use to decide to

20:14

exit is price and

20:16

value and looking at those two

20:18

things. So if the price of the stock

20:20

is well above the value, I I

20:22

really do wanna sell

20:24

it. And if I'm not selling it

20:26

because I don't have any place to put the

20:28

money, then I do run the risk that the market crumbles

20:30

because everything's massively overpriced. It

20:32

really should crumble. and

20:36

should have crumbled in my view

20:38

years ago. And maybe

20:40

it's crumbling now. I mean, you know, you can you

20:42

can wait forever for the market to crumble

20:44

and be right. eventually. But meanwhile,

20:47

you're not getting great returns.

20:49

So the the

20:52

possibility that you run the the

20:54

risk of is that the market crumbles right

20:56

up from under that stock and you just ride

20:58

it down. And you don't really you

21:00

don't really have a crystal ball. You just

21:02

sort of see it going down

21:02

and it's gone down before and then come back

21:05

up and that's what most people are doing right now. I was

21:07

hoping things come back up. So

21:10

the

21:11

fourth kind

21:14

of way of doing this that we could use

21:16

is to apply what we

21:18

call the arrows or

21:22

what are

21:23

what are what

21:24

sort of

21:25

Yeah. You mentioned that. But

21:27

Yeah. Yeah. That

21:30

that's another way to go where you would

21:33

say Okay. I'm buying wonderful business.

21:35

I'm holding it. And

21:37

now it is at

21:39

intrinsic

21:39

value. What shall I

21:42

do? And the right answer

21:44

a lot of the time actually

21:47

is hold

21:49

it but

21:50

watch the arrows that I discussed in

21:53

the book rule number one. Watch

21:55

those arrows on a long

21:57

term or a long period view.

21:59

you don't

21:59

wanna do it on a short term basis. You wanna do it

22:02

on a long term period view, which is,

22:04

you know,

22:04

at least thirty days or longer.

22:07

for using the tools. So I'm not gonna teach

22:09

you all about how to use the tools here on the podcast. Just

22:11

get the book and look at it and tell you exactly how

22:13

to use them. Well, and as as we said

22:15

last time, we did a

22:17

whole episode or two or three on

22:20

those tools so you can go back

22:22

and and

22:22

find that. Yeah. Somewhere.

22:25

Somewhere. Yeah. Exactly. Like I said last

22:27

time, I think it's in, like, the

22:28

two hundreds somewhere. Oh my

22:31

god. Are we

22:31

in the two? So don't know where That

22:34

particular way of doing things

22:36

is is

22:36

where I'm that's kinda where I am

22:39

now is

22:40

to ride these things in a market

22:42

that's really pretty much insane

22:44

in its overvaluing or

22:47

overpricing. And just ride them and ride them and ride

22:49

them until you get three long

22:51

term red arrows and then you And

22:55

that seems to be about

22:57

the

22:57

best way to make the most out

23:00

of things.

23:00

without taking risk.

23:02

Okay. What are your

23:05

thoughts? Well,

23:05

I mean, like where we ended last

23:07

time was

23:08

wondering about if tech stocks are in a different category,

23:10

and I'm just still wondering that.

23:12

Are tech stocks in

23:13

in a different category or in,

23:15

like, maybe one of these categories?

23:18

and not the other ones. And the

23:19

reason I'm thinking that is that

23:21

they're harder maybe

23:24

it's

23:24

just a risky biz category

23:26

I don't know, but they're just harder to

23:29

predict, and the technology

23:31

changes so quickly. that

23:35

that's what puts them into this

23:37

risky category. And so I wonder

23:39

if maybe they are

23:42

this is just my instinct. I think I would put

23:45

them into the

23:47

second

23:47

category of

23:50

sell

23:50

it sticker. Boom.

23:52

Whether you go into cash or you go

23:54

into another company, you you

23:56

you plan your strategy if you're gonna

23:58

buy one of those,

24:00

and stick

24:02

to it.

24:04

Which is

24:05

usually just sell -- Which is usually

24:07

-- everything you buy. Yeah.

24:10

Of course, you

24:11

should do that. You're right. Of course, you should do that on

24:13

everything you buy. But let's let's talk

24:15

about what makes these different.

24:17

You know? Yeah. I mean, the essence of a tech

24:20

company is

24:21

at least

24:24

okay.

24:24

One view of tech companies is

24:27

they grow by creative destruction.

24:30

So Apple computer

24:32

grows by Destroying

24:35

iPhone thirteen --

24:37

Mhmm. -- with iPhone fourteen --

24:39

Mhmm. -- destroying

24:40

the iPod by

24:42

putting music on the iPhone. Right on. Mhmm.

24:45

So the this idea of creative

24:47

destruction is how tech companies move

24:49

forward. But man,

24:52

you think about

24:53

Facebook moving

24:55

forward by acquiring

24:57

-- Mhmm. --

24:58

a lot of other companies that have

25:00

come out of nowhere and produce some

25:03

really amazing technological breakthrough that

25:05

changes our lives like

25:07

WhatsApp and Instagram.

25:09

Yeah. which it bought. And

25:11

and

25:13

Google out there

25:15

inventing new stuff all over

25:17

the planet. Right? and then you

25:19

get sort of a tech muggle like Elon Musk who

25:22

is trying to

25:23

reinvent solar panels and reinvent

25:26

space launches and reinvent tunnels and

25:28

reinvent cars and and

25:30

now reinvent a public

25:32

square. Mhmm. I think with

25:34

the Put a order. And

25:36

so you

25:37

you're looking at this and just going, well, where are they gonna

25:39

be in ten years? And

25:41

it's very difficult

25:44

for

25:44

for some of these companies to have for for us

25:46

to have a view of some of

25:48

these companies. That's

25:49

very well said. That's

25:51

that's good encapsulation of the

25:53

issue of investing in

25:57

high growth mature tech

25:59

companies. Yeah.

26:01

So I think I might go along with you

26:03

on your idea that you do

26:05

option two, which is to buy when

26:07

they're on sale. and sell it in

26:10

intrinsic value because

26:12

it's

26:12

quite likely you'll get to that

26:14

sale within a

26:15

couple of years, two or three

26:18

years. In other words, you're gonna buy it at half price.

26:20

It goes back to full price you get

26:22

out. And that is a

26:24

lot more

26:25

more I

26:26

guess,

26:27

you can handle that

26:29

mentally better than trying to figure out where

26:31

a tech company is gonna be in ten years.

26:33

who really knows. But in two

26:36

years, you can figure Microsoft will still be rocking

26:38

and rolling. Facebook will still be

26:40

rocking and rolling. Google, Apple,

26:42

they'll all be doing well in

26:44

a couple of years. Right? So if you can buy them

26:47

on sale, I mean, we

26:49

bought Apple at thirteen dollars a share in

26:51

in current price

26:52

in the current split. And,

26:55

you know, that's just a kind of a no brainer. It's

26:57

delivering an eleven percent yield

26:59

on owner earnings. It's

27:02

just a no brainer

27:04

to buy that as long as you're not going

27:06

to just sit in it forever.

27:08

If unless you have some crystal ball that

27:10

you know Apple is gonna be around in ten years

27:13

bigger than ever. Now Apple, I Timing, is

27:15

actually Apple and

27:15

Google are probably their own case.

27:18

Apple, Google, Microsoft. because

27:20

I'm not gonna put Facebook

27:22

in the same category, but I'll put Google,

27:24

Microsoft, and Apple in a category that

27:27

says, and ten years are

27:29

all bigger. Yeah. I mean,

27:29

I think this is, like, the the

27:32

fundamental trouble that I

27:34

run into every time Timing,

27:37

one, impossible to

27:39

predict where it's gonna be in ten

27:41

years. Two, gotta be able to

27:43

predict where it's gonna be in ten years

27:45

to do

27:47

and then three, I'm

27:49

confident it's gonna be

27:51

greater and successful.

27:53

In ten years, I just don't know

27:56

how.

27:57

So it's almost

27:59

and I

27:59

hate to say it like this because this is

28:02

dangerous, but it's almost like

28:04

there's kind

28:04

of another semi

28:07

category for companies like

28:09

that where and this is I think what I hear you

28:11

saying where it's a little more like

28:13

you're more on

28:13

top of it. Maybe it's not

28:15

a company that you're buying for the rest

28:17

of your life,

28:19

but a

28:21

company that you have high confidence in, it meets everything

28:24

except that, like, severe

28:26

predictability element. And

28:29

so, like, the second anything changes

28:31

or the it's it's it's it's like a

28:33

very

28:36

I don't I'm trying to think of a better way to say high

28:39

risk, but because

28:42

I think it's not high risk. Well,

28:44

here's the same time being really on top of

28:46

any change. is. What am

28:48

I what am I blend? Would you put would you

28:50

put apple in that category? Yeah,

28:52

I would. You

28:53

would. because

28:54

Buffet clearly doesn't.

28:56

Yeah. Clearly.

28:58

Right? I mean, he he sort of famously said

29:00

that, you know, as we said before here on

29:02

the podcast that when a good friend of his that owns

29:04

a private jet, said he'd give up his jet before

29:06

he'd give up his iPhone. It was clear

29:08

to Warren Buffett that, you know, something

29:11

magic had

29:11

happened at Apple. And

29:14

in fifty percent of

29:15

the revenues are coming from the iPhone. It

29:17

is without

29:18

question that

29:20

there that the phone of

29:22

choice in my view. Would would you agree?

29:24

Oh, totally. I have a And the only reason you get

29:26

some other phones, you can't afford an iPhone essentially.

29:29

That's not true. A lot of people love their

29:31

Android phones. I will defend

29:34

that. But What? No.

29:36

III

29:36

know people who love their Android.

29:39

Like, prefer it over the iPhone.

29:41

I I don't understand

29:43

it. I'm not giving details.

29:46

I don't it.

29:47

I don't get it because I spoke to

29:49

people who feel that. Okay.

29:52

But I operate in an ecosystem. Maybe

29:54

they have the whole different way of

29:56

working, but I'm in an ecosystem. It's

29:58

an Apple ecosystem. I'm

30:00

wearing an Apple Watch, the big one.

30:02

The new big one, it's like big

30:05

Yeah.

30:05

It looks really nice. I like it. Does it?

30:07

Yeah. I like it a lot. You know,

30:09

when I go out and I'm I am on

30:11

my horse out in in

30:13

country, I don't know well.

30:16

Having the compass on this

30:19

thing, I just push a button and it

30:21

starts to ENABEL ME TO

30:23

BACKTRACK MY TRACKS OFF

30:25

OF

30:25

MY WATCH. WELL, GARDMONTON HAS

30:27

BEEN DOING THAT FOR YEARS. You

30:30

know?

30:30

Yeah. But it's not in a watch that's got everything

30:32

else going on. Yeah.

30:34

I've had Garmin watches and it's like, yeah,

30:36

this is not the thing.

30:38

know I got I love my Garmin watch.

30:41

Love Listen. I'm not putting down your guys right

30:43

away. Phoenix. Garmin.

30:45

s. it's really good and it doesn't use

30:47

We use Garmin for all of our

30:50

hounds. We put the Garmin collars on

30:52

their magic I I love them.

30:54

But this watch is in a whole different league,

30:56

and and it

30:58

it is magic. So the

31:00

ecosystem, I'm I've got

31:02

Apple

31:02

computers at home, Apple computers at

31:05

work, and

31:05

it all just works together. And that's

31:07

the critical thing for me is I

31:10

can't

31:10

stand it when I gotta try to figure some

31:12

technology. Yeah. For sure. Something up. Yeah.

31:14

I want my printer to work with my computer.

31:16

I don't want it to be a thing. Which

31:19

was Steve

31:19

jobs is original

31:22

genius. It should just work.

31:24

Right on. It should just work. Don't need a

31:27

manual. It should just work. So

31:29

that that is what I understand, Buffet,

31:31

realized about Apple, is that it's an

31:33

ecosystem that is

31:34

without compare in the world, which

31:38

means they no longer have to be a

31:40

company that invents new things.

31:42

All they have to wait

31:43

for is for Samsung to come up with a

31:45

new and better technology and see what it

31:48

does. And then they'll plug it into

31:50

their

31:50

iPhone or come up with something else,

31:53

somewhere else, with some other technology. And they

31:55

just plug it into the system. And and

31:58

that is such a powerful

31:59

art. It's a powerful mode that

32:02

where you

32:03

know your customers aren't leaving.

32:06

The

32:06

switch mode is It's a

32:07

powerful mode. It's

32:09

a very very powerful mode

32:11

which has been breached.

32:14

massively, twice

32:17

in the history of computers. So

32:20

one Mac the

32:21

first time, and

32:22

two, Microsoft

32:24

and Windows the

32:27

second time.

32:27

No.

32:29

The moat is ecosystem. When

32:31

has

32:31

that been breached? So

32:34

first

32:34

A system where it all goes

32:36

together. it all goes together. Everybody

32:38

had Max. excuses.

32:39

Yeah. Back when Steve Jobs is running the

32:42

company. Right? Everybody had Max.

32:44

was working well. had now there

32:46

was DOS. Remember DOS? No.

32:48

You had a

32:49

Mac computer. There's no ecosystem. You just

32:52

had a Mac. There it is.

32:54

Oh, okay. Alright. Well, if you wanna put it in

32:56

the ecosystem, which But everybody used Macs

32:58

and

32:58

then they didn't. Right?

33:00

because windows showed up, and windows was cheaper and

33:03

easier. So everybody

33:05

switched to that. Please don't be confused

33:07

by what Danielle is

33:09

saying. She is

33:11

comparing

33:11

apples to oranges here. Why do

33:13

you

33:13

think it's apples to oranges? Did you

33:16

see Buffet

33:16

by apple when he hit when there was Macintosh

33:18

out there? I don't think

33:20

so. No. It's the advent of an ecosystem,

33:23

which makes Apple moving

33:25

past the the demand of

33:27

technology to to have creative

33:29

destruction. So by ecosystem, you

33:31

mean multiple products. Multiple products

33:33

that all work together seamlessly.

33:35

So for

33:36

example, the home

33:39

what

33:40

technology ecosystem is

33:42

a big deal. Yeah. And

33:44

I

33:44

could go get with

33:47

Google. Mhmm. and struggle

33:47

to figure out how to put it all together, or

33:49

I can go get

33:50

Apple's home system and turn it

33:52

on. Right? And it works with my computers. Yeah.

33:55

and

33:55

my iPhone. So that's

33:58

what I want. I don't want to have

33:59

to have one of the guys that works for me go

34:02

figure out how to put a nest system into

34:04

my house. So -- Okay. -- that's the

34:06

gigantic difference. Apple hasn't been the

34:08

inventor Investing forward

34:10

necessarily on home technology

34:13

environments, other companies have done that ring and all these

34:15

other guys have gotten in front of that, but

34:17

Apple will go in and take their

34:19

share of that market. And that's

34:21

because of an ecosystem. And that's that's the moat that they've got,

34:23

which is gigantic. And

34:26

that's why Buffet bought Yeah. It's real.

34:28

Okay.

34:29

if group Alright.

34:30

So It's really big and really strong.

34:34

And big and strong motes

34:35

can be preached.

34:36

Right?

34:38

Oh, yes, they can. I mean, the home

34:40

thing is a great

34:41

example because Apple's really failed in

34:43

that arena. Google is

34:45

by far winning.

34:46

is by

34:47

So it's I

34:49

don't think Apple

34:50

Apple

34:52

is

34:53

just entering it.

34:56

it's only just start

34:56

to put together the product mix. Okay. Which

34:59

I think is gonna be a great example

35:01

of how powerful that ecosystem. But

35:03

so the question We get into these,

35:05

like, debates over how good Netflix is or how good Apple

35:07

is, whatever. The point is, are

35:09

these companies predictable

35:12

enough or

35:14

the

35:14

same as all other companies such that you would make such make,

35:17

like, roughly the same decision

35:19

making process or

35:22

Are they in a different sort of riskier category? Well,

35:26

that's why I'm trying to

35:27

point out the difference between Apple

35:30

now and Apple back when you were saying, oh, you know, that moat got

35:32

breached. Uh-huh. Totally different company.

35:34

Totally different moat. And

35:36

and a technology company

35:39

that has that kind of a moat is

35:41

no longer really a technology company anymore. They've got

35:43

a switching moat that technology

35:46

companies

35:46

technology companies don't have don't have.

35:48

Right? I mean, it's like, as you said, there's a

35:50

cheaper almost as good model that comes

35:52

out from some competitive company. And, bam,

35:56

you're done. with your more expensive but not good

35:58

enough to be worth the price

35:59

product.

36:01

And, you know,

36:03

an ecosystem is an entirely different world that's

36:05

then that's what is the

36:07

critical thing. When you've got a switching

36:09

mode because everything you've got in the world is

36:11

tied into this ecosystem -- Mhmm. -- then

36:13

you don't have a technology company per se, and you do

36:16

have predictability. And that's

36:19

the difference. So I would

36:21

say when you look at a technology company, if they have to survive

36:23

by creative destruction and

36:26

and and could

36:28

could be

36:29

beaten out by the next generation

36:31

of something that comes out of a

36:33

garage, then they don't have a moat that you can

36:35

count on. You don't know where they're

36:37

gonna ten years. Oh, god.

36:38

That's interesting. Does

36:41

that help? Yeah. I

36:43

wouldn't

36:43

touch him. just

36:45

because we don't want

36:47

to have companies that we

36:49

can't predict

36:49

unless you can buy this

36:52

thing on sale and

36:53

you have a you have

36:55

a strong a strong

36:57

view that this thing is gonna go back up to

36:59

intrinsic value in two or three years.

37:01

other words, it's a market meltdown. The economy is gonna recover and

37:03

it goes back where it was. Good. Buy

37:06

it. But it's a short term position.

37:08

It's not a long term position.

37:10

I'd say that. Okay.

37:11

That's a good place to

37:13

ask.

37:13

Okay. Pam. With that, we

37:15

were. Moment of moment of

37:17

On on

37:19

ends today. Gosh. Have a

37:22

great week, everybody.

37:24

Let's do that. Bye.

37:29

Hi, guys.

37:32

Thanks for

37:35

listening to invested. If

37:37

you enjoyed this episode and you want

37:39

more information or to listen to additional episodes, visit our website at invested

37:42

podcast dot com. And sign

37:43

up for my virtual workshop

37:46

right there. spots are

37:48

definitely limited for this event. I'm not

37:49

Timing. They really

37:50

are there sell out very quickly. So

37:53

everything discussed on this podcast by the

37:55

way is either my opinion it's Danielle's

37:57

opinion, and it really important it's not to be taken as advice

37:59

because

37:59

I am not your

38:02

financial advisor considered

38:04

your personal situation as your

38:06

fiduciary. So remember that. You're

38:08

on your own here. This podcast

38:10

is for your entertainment and education

38:13

only, and I really hope

38:15

you enjoyed it.