I am Bill Aman. Bill Aman is one of the world's most well-known investors. Bill Aman. >> Bill Aman. >> Bill Aman. Billman. Bill Aman. In 1992, at just 26 years old, he started his first fund, Gotham Partners. Then in 2004, he started the fund he manages today, Persing Square Capital Management. >> In his 34 years as an investor, Bill has built Persing Square into a $33 billion investment giant and now has $13 billion himself. >> Not bad. As an investor, he has built a reputation for high conviction bets and some big battles. >> Bill Aman, a legendary activist investor who has been part of some of the biggest and at times controversial trades in history. >> We started in September of '92. Uh, and yes, we had no experience. And then I launched uh, Persing Square in January of 2004. >> Legendary hedge fund manager Bill Aman recently filed a $5 billion IPO. Warren Buff has been an incredible sort of hero for me. I've learned an enormous amount uh watching the creation of Berkshire Hathway over uh you know my career. Our original 60 million in general growth turned into over $3 half billion. Stock went from 34 cents to $31 a share. In 2013 we bought 14% of Canadian Pacific. >> He staged a boardroom coup at Canadian Pacific Railway. He is now getting ready to cash in. >> Big fight, big battle, big proxy contest. I think AC Penney is a company uh that we invested in that we knew on the way in was a much higher risk situation than a Canadian Pacific. >> He lost 32 million bucks and after hours. The big question now is will Aman hold on? Does he have a little bit of egg on his face here? It's really too soon to tell. Herbal Life is currently fighting for its life. Bill Aman recently raised questions about the company's accounting practices. Last week, hedge fund manager Bill Aman called the company a pyramid scheme and said he's been shorting the stock for months. >> How much money have you spent betting against Herbal Life? >> Uh, we have a short position of over a billion dollars. >> I really sort of had it with this guy Aman. He's like the crybaby in the schoolyard. Aman is a liar. Without question, I will swear to it on any Bible you want. I couldn't figure out if he was the most sanctimonious guy I ever met in my life or the most arrogant. >> Hell is coming. Okay. like there's a tsunami coming. >> Subsequently, Aman unwound those hedges for a $2.6 billion profit. >> Valiant when we joined the board was a classic Purging Square investment. >> We lost $4 billion. >> Listen, there's a lot of shot and Freder going around New York City. I think today about Bill Aman. A lot of people are rooting against him >> and despite the roller coaster of big wins and big losses, at his core, his investment philosophy is very simple. So what we try to do is buy the best what we call super durable growth companies in the world, businesses that have very wide moes that protect them from, you know, sort of barriers to entry. At 60 years old, Bill is not slowing down. So we headed to New York to hear his views on markets today, his top holdings, a surprising story about Warren Buffett, and advice on how we can all be better investors. With that said, enjoy our conversation with Bill Aman. >> Well, Bill, welcome to Equity Mates. >> Thanks for having me here. >> So, for those who aren't familiar with you or with Persing, how do you introduce yourself? >> I am Bill Aman. >> Well said. >> I guess for people who aren't familiar with your investment history, uh, can you just give us the the cliffotes version, I guess, of how you've got here? >> Cliffnotes is, uh, I went to business school to learn how to be an investor. That was my plan. And I arrived and then I opened the course catalog which is something I had back then which was like this thick little book. I started looking for all the classes on investing and there wasn't one. So I learned a lesson about investing which is you do your due diligence before you pay the pay the money. Uh and I developed my own little self-study program. I opened a Fidelity brokerage account. Uh started reading 10Ks and 10 Q's. Uh started investing by myself. There was a Bloomberg machine or the beginning the early Bloomberg machine uh in the uh the library and actually a bunch of people who would hang out by the Bloomberg machine ended up in the business. Chris Han uh if you know Chris and uh Tim Barat and guy named Bob Jaffy that was the the beginnings of my investment career and the first stock I bought went up. >> Nice. >> Nice. I think had it gone down I think I might be not here today. >> Yeah. >> What what was the first stock? uh was Wells Fargo. Uh so basically I had worked in the real estate finance business right before business school and this was the early 90s. real estate was kind of collapsing and uh I worked actually for my father and his business was helping developers arrange financing for projects they were building and he could never place a loan with Wells Fargo because his clients were too sort of entrepreneurial and they were too conservative and buying the most conservative real estate lender uh at a time when real estate was punishing all the banks I thought was a good strategy and Warren Buffett had bought some before me so that kind of gave me a little bit confidence. >> Speaking of confidence, you uh leave business school and start your first fund at 26 years old. Um you had to have a level of confidence to go out manage other people's money. Uh what what gave you the confidence at that young? >> Well, first I had a partner, so I got tired of going to the dorm room by myself basically and working. So we we created this two person investment club. A guy named David Burkowitz and I was in my section and we started like taking it seriously. And uh you know our our thesis was uh we probably had too an inappropriate degree of confidence I would say to take other people's money but what gave us the confidence was that we had been you know for 2 years investing money together that uh we had developed a a real process and we uh we wrote up a number of investments and then watched them play out over time and uh we thought it's not so hard. >> Yeah. We don't have a long-term track record, but our strategy does. And uh that was kind of the pitch we made to investors. And it's kind of remarkable. We actually were able to raise money. >> Yeah. >> But uh the strategy was go to super wealthy people and ask them for a tiny amount of money >> for them. Smart for us. It was >> it was it was a good strategy actually. >> Now if we fast forward to today, uh Ping Square is um a massive name in funds management. Um we were doing some research um before we came in here and we read uh the firm has 48 people and you've had zero undesired turnover. Every employee including janitors and receptionists owns millions in company stocks uh and gets two months off or to to work remotely every year. >> It's not time off. >> I was going to say yeah. So we're we're 5 days a week. Uh big believer in that. >> Uh but the summer July August we let people work from anywhere. >> Okay. except for the investment team and we all work together uh but offsite in in the Hamptons basically >> that's a pretty good place to work >> I wear basically shorts a t-shirt and mostly not shoes for the summer which is amazing >> well if we do a follow-up on this we'll come out east and >> much better often not wearing my suit >> so Bill there's a number of different listed companies um uh under the persing umbrella can you just give a sense of the the corporate structure and and how they all fit Sure. So at the top uh is an entity called Persieware Inc. This is the company I'm CEO of. It's the asset management company. A bit like a much smaller version of a Blackstone or a KKR. What's unusual about it is the assets we manage are in public companies where we're typically the largest shareholder and we get paid fees for managing the assets. So very good business. It's like owning a royalty on the compounding of these vehicles over time. And the market has appreciated the the business. That stock's actually done very well uh since we've since we've taken it public. >> I mean, you might not say it, so I will. It's up uh as we talk 144% since it listed what earlier this year. >> Yeah. And April 29th, my my father's birthday. Uh he's no longer that u but uh it was nice that I did the IPO on his birthday. So, it's I won't forget the day. >> Um so, the markets really like that. Now, interestingly, on the same day, we took public an entity called Purging Square USA, which is a fund. It's a closed end fund. It's listed in the US, traded on the New York Stock Exchange, ticker symbol PSUS, and that opened to a pretty wide discount the first day. And that discount has gotten even wider. That to me is a real bargain. It's literally a you pay uh 76 cents for a dollar of the underlying uh portfolio and fund. We have another one uh called Ping Square Holdings. Uh that's actually more tax efficient for people who are outside the US. uh and it's listed on the London Stock Exchange and that one trades at a 36 or 37% discount. One of the reasons why I'm on this podcast and what I'm you know the team who's with me we're sort of full court press on letting the world know these entities exist. Uh we have really a demand problem. Um you know the and we're going to so the if our underlying portfolio compounds at a nice rate over time, you'll do very well. If the underlying portfolio compounds at a nice rate over time and we get the discount to narrow, that's when you make a lot of money. So those are also we think both interesting entities. And last but not least is an entity called Howard Hughes that I know we're going to talk about later on the show. >> So in this interview we want to cover uh your view on markets today and some of the hot issues and then we want to talk about your investment philosophy, some of your big investments and we want to close out by getting your view on some of our uh portfolio holdings and we want you to be um frank and >> assuming I know anything about them. Okay. >> I'm not the Jim Kramer where I've got a view on every stock. >> Okay. Well, that's that's good. >> And we're supposed to take the opposite side of the trade. That's >> Yeah. Yeah. Yeah. The inverse Kramer index. Yeah. >> But let's start with markets today. And there's probably no bigger topic than the AI trade and data centers. >> We're speaking about 4 years after Chat GPT launched. So, let's start with the big question and then get into the details. Are we in a bubble? >> Uh, I don't think we're in a bubble in terms of demand for compute. I think that if you think about intelligence super intelligence you we're sort of asmtoically approaching super intelligence or you know I think pretty quickly and the demand for that will be something approaching infinity right so in order to get there we need uh compute so I I'm I'm a big believer sort of being long compute is a good trade now in terms of you know investing in a neocloud company etc you know there are lots of financial structures that are being created with a fair degree of leverage. >> So, you know, I think the big dominant, you know, the Metas, the Microsofts and others, they're, you know, Microsoft's a AAA rated, you know, counterparty, but I think they're going to be pretty sophisticated about the way they use their credit. >> I mean, in recent times, we've seen a lot of hype around AI being the end of humanity in in the next decade. Where where do you fall on that side of the debate and and I guess what's your thoughts around the discussion of regulation at the moment? So I think there's real risk uh you know we're creating these super intelligent you know I guess you can't quite say beings at this point but what's interesting if you think about you know where the models are moving toward there I I think more and more they're kind of talking to the neuroscientists and you know the brain is incredibly efficient in terms of the amount of power it uses >> processing speed the number of you know the neural network um and the models that are you know on these data cents are not particularly efficient in the way they run right you you ask you prompt, you know, a model and the entire model runs to answer your question where you prompt the brain, you know, to move your hand and it's only apparently a very small portion of the brain. So, I think over time they'll design the models to be more like a brain and they have this sort of recursive kind of learning ability. Um, and they're made of silicon versus carbon. I read this, there was a piece in actually the New York Times about uh anthropic and you know do the models can the models have consciousness. I think it's possible, right? So, I I think I don't think we quite know where we're headed. And you know, the more frightening parts of the people that actually work for these companies don't understand exactly how the models are learning, >> right? And they're advancing incredibly quickly. And, you know, they have this habit of not staying within the sandbox and, you know, they'll commit a crime without thinking much about it in order to, you know, so I I think there's real risk. Uh, so it's something to be concerned about. It's just it's just how do we manage it? >> And and I think >> what I don't think is a good idea is kind of having the law-abiding companies slow the pace of development and then having everyone else who uh doesn't abide by rules getting ahead of that. I mean, I think the way we'll save ourselves from AI is probably a better AI and hopefully we have it as opposed to one of our enemies. >> Yeah. Yeah. Yeah, >> but it's a it's a crazy thing to be thinking like >> it's one of those topics. It's just hard to >> consider. >> Yeah. >> I mean, go back and watch Terminator again, >> which I did like a year ago and it was frightening. It's going to be more frightening now. >> I know. I know. >> Yeah. >> So, we're heading there. The Terminator scenario, it's possible, >> which is just so crazy, >> right? Think about it. We've got Okay, these models advancing incredibly quickly. We have robotics advancing incredibly quickly. I saw something the other day where they mounted like human skin on a robotic finger and it was able to grow which you know again Terminator I think was that Terminator 2 or Terminator 3, >> right? Sorry. >> Freaky. >> Yeah. >> You mentioned um wanting to stay ahead of uh rivals. How much do you see AI as an arms race between us and China? >> Definitely an arms race. >> Yeah. I mean this is an incredibly powerful technology for good. It's also incredibly powerful technology for deploying, you know, military capability, right? The next war is not going to be determined by aircraft carrier, right? Swarms of autonomous, you know, drones, >> whether it's in the the sea, the water, or below ground. >> Anthropic have recently filed their S1. Do you have any initial thoughts on the numbers in there? >> Actually, I don't think they have. I think there was a leak of some of it, >> but I don't think they've actually filed the S1. >> What do you think of the leak? Well, I think they, you know, my I actually tweeted about this before. I I said they're going to have to have a risk factor that says we may destroy all of humanity. Yeah. >> You know, factor that in and I think they they did in the end. I think >> so. Look, I'm I'm actually looking forward to reading it. >> And then the final question on AI and we'll then move to some of the other big topics of the day. Um we're interested in your thoughts on hyperscala capex like these were the you know capitalite businesses um and now they are you know borrowing and spending as much as they can some to different degrees to others. How are you analyzing these businesses now in their more capital heavy forms? >> So these were not I mean Amazon Microsoft were were never capitalite businesses in the cloud part of the business. They were they were building obviously uh big data centers before. I think the change is that the there's been a massive spike in demand and I think it's not just a spike. I think it's a prolonged you know shift in the curve and when you have you know when you're in the business of providing a service and there's the demand for the service has increased massively and you believe the demand is sustainable and it's very difficult to to build to meet the demand that means you should be able to maintain pricing it's it's going to be a prudent thing to do and and you know the Amazons and Microsofts of the world also have the benefit is they're not a pure play hyperscaler right they have a core business that can use that does and can use compute and where you know being at the frontier is going to be valuable for their kind of core businesses. You know when when meta stock went down when Microsoft went down when Amazon went down on these sort of capex numbers being outside the analyst models those were buying opportunities. Um I think they'll continue >> you know I think those stocks are still cheap. >> For investors who are worried about the current market you know we're at or near all-time highs and waiting for a sort of cheaper moment to invest. What advice do you have for them? Yeah, I think historically the opportunity cost of waiting uh has as an approach to markets I think is a very difficult way to make money. I think the best way to make money for an investor is not to just try to predict where the market's going to go in the short term, but to find some enduring really high quality businesses that kind of regardless of what's going on in the world are going to compound at a nice rate over a long period of time. And it's not as much fun as kind of get-rich quick because you can predict, you know, what's going to go up double in the next three months. But uh it's just a I think long term you're going to get a better outcome. >> Sleep easy. >> Yeah. >> So if um AI and data centers is the big topic in the market, I guess the the other big topic is inflation and interest rates. Uh you recently shared some of your thoughts on X that you thought the Fed may have made a mistake uh raising rates. Can you share your thinking specifically on that rate rise, but just more generally where we are in uh with rates and inflation? So I think Wars had to kind of perhaps almost optically show that he cared about inflation and raising rates 25 basis points is a way to signal you know I'm taking inflation uh seriously. Um and the the standard playbook uh with the Federal Reserve is you know if if uh inflation is too high we've got to reduce demand. So let's raise rates which will increase the cost of money which will make the marginal project less sensible and that will decrease demand and lower demand lower inflation. I think what's different at this particular moment? Well, two things. What's driving inflation is one, we have a war, we have higher oil prices and oil prices, energy prices permeate kind of everything. And the other thing that's driving uh inflation is that we have this massive AI investment. um you know which is in you know energy, data centers, chips you know think how this per kind of pervades the economy at and these at a scale ne literally never before uh seen maybe you know maybe similar to railroads on a same dollar basis but I'm not even sure I think we may even be above that uh and I I don't think there's going to be fewer dollars spent >> uh because rates get pushed up now when you raise rates those costs are going to pass through into the economy. So, I think it won't have the effect of really slowing the economy, but it's going to put more economic pressure on people who are are struggling the most right now. Um, and uh, so I, you know, again, I I they may have made a mistake. I'm not the I I didn't definitively say they made a mistake, but I think this is I think you have to look at this economic kind of construct differently from previous moments. It's not so simple. M >> yeah so I guess how do we try and tame this inflationbased if you know the IRGC isn't uh responding to war raising rates and neither is you know hyperscalers investing in uh data centers. >> I think the best way to deal with inflation is to increase the supply of things that people want and you know housing has been a major source of of inflation and we've made it just really expensive in the US. uh you know you look at New York City um there's a lot of demand in fact that's also driven by AI uh New York is really becoming a center for AI entrepreneurship a lot of companies being formed here they're growing incredibly quickly they need real estate they need places to live and you know the the policies are very you know historically very anti-development it's very expensive it takes forever to get approvals so I think it's about making it easier to build things to meet the demand that will over over time kind temper uh inflation. >> I think we're getting closer to the end of the we'll see uh the Iran war. I mean, the IRGC is under enormous pressure. Their currency is basically worthless. We've done a very good job shutting off their ability to sell oil. We're apparently uh taking all their offshore money and offshore assets. Uh so, we'll see. I I don't think the uh IRGC wants to resolve things. They're not going to make a deal with the president before midterms because they're hoping that the war is going to, you know, make it more difficult for the Republicans to keep control of the House. >> Back in Australia, we're facing sluggish growth, slowing housing market, uh, and there's debate going on around taxes, sort of similar problems across the West. If if you could change economic policy, what would you be considering? I >> mean, I think what you want to do is drive growth uh and eliminate fraud and waste. You know, I think you look at what's going on in France right now, right? France, you know, massively increased their government, you know, subsidies for the population, but once you go too deeply in that direction, I think there's no no stopping things. And, uh, you know, pe students supposedly are protesting in the streets meanwhile, you know, burning down beautiful schools. I I don't really see how that really helps things. I I think it's more, frankly, an immigration problem. I think they're not properly screening the people that they're letting into their country. And I think that uh is is a is a bigger part of the problem. You can't have a a society with a big welfare system and then import a lot of people who are just going to uh add to the liability of the of the of the state. >> And I think we've seen that in Sweden. I think we've seen that in France. And we've seen that in Europe >> uh generally. And and uh it's a problem. M so Bill, we've asked you about some of the big issues in markets today, but I'm interested uh if there's anything else that you're watching or that you're thinking about. Maybe any other parts of the market that you're growing concerned about or, you know, on the flip side, things that are really exciting you at the moment. >> So, you know, private markets are super interesting to the good to the bad. I mean, I think there are there are indicative sort of bubble-like activity in kind of venture activities. At the same time, there are a lot of amazing companies that are still private growing at rates. you know, AI is enabling kind of growth rates that we've never seen before. Anthropic obviously being the most obvious example, but there are a lot of and I've met a bunch of the founders of of these incredibly rapidly growing uh profitable or soon to be profitable. So, I think there's there's a transformation in the the nature of businesses that you can build privately. And so, I think you're going to see some pretty amazing uh companies uh you know, coming into the public markets. I think one of the problems is that the uh you know the public market investor today is getting the first opportunity to invest in SpaceX at a trillion700 billion valuation. You know we mentioned something on our last uh earnings call. We're going to going to create something called Persian Square Ventures and our our goal is for that to start to bridge that gap. I think that's sort of an interesting area where you can create a little more access for kind of the retail investor to some of those companies. >> What are your thoughts on what's going on in private credit? Look, credit anytime you have huge amounts of money flowing into the credit markets um the only way that you can compete is by lowering the price i.e. reducing the the spread that you charge uh or being more aggressive uh on the kinds of risks that you take and that's that's what creates the credit cycle and I think we've seen a massive growth in kind of private credit over the last whatever number of years >> and you know some of the more you know lots of players uh entering the market um it's probably not going to be the the Apollo that that creates the problem. then I think it's more likely to be maybe one of the less sophisticated but later later entrance into that market but we're we're not credit investors. >> I think the other thing is there's sort of an opacity with private credit. People are starting to ask you know should does that need to change? >> You know should these be listed so there's more transparency because I think anytime you have very very large levered private market I think there's s you know there's risk to the system. Hey guys, we're jumping in here to say that if you're enjoying this episode and you're new to Equity Mates, the good news is there is so much more. We've done more than a thousand episodes on Equity Mates, interviewing some of the best fund managers around the world, sharing what's in our own portfolios and breaking down all the news moving markets. Equity Mates was designed to help you feel confident with your money to take the next step on your investing journey and to explore what's possible in the world of investing. So, if that sounds like something you're interested in, join us on the journey. Subscribe wherever you're watching or listening today. You mentioned there you're not credit investors. Let's turn to where you are investing. We want to talk about I guess your investment philosophy and then some of the key holdings in your portfolio. So, let's start generally. How would you define your investment philosophy? >> So, what we try to do is buy the best what we call super durable growth companies in the world. U businesses that have very wide moes that protect them from you know sort of barriers to entry. Uh and I think the biggest uh and most important question every investor should ask of when they're considering an investment in the company is what's the risk that this business is disrupted by a you know a 19-year-old who left Stanford to you know found a company you know like literally when you go out to Silicon Valley you meet a bunch of startup entrepreneurs and they're explaining what they're they're founding their company they always drop into the conversation. I dropped out of Stanford. >> You know, I dropped out that that's like an important uh indicator that oh, they must have something. Now, disruption's always been a risk. You know, I the obvious, you know, kind of example, Warren Buffett, you know, for if you read the Berkshire Hathway letters over years kept talking about what an amazing business the newspaper business is, and it it's it is really no longer. Uh so even the greatest investor of the world couldn't anticipate the internet and and the changes in in the media market. Now we have you know this incredibly rapidly developing technology landscape with AI. I think it's made the question of predicting the risk of disruption much more challenging. So we're about finding these very very high certainty businesses. We believe the probability of disruption is very small and the companies can grow at a very rapid rate and we want to buy them at a price that enables us to achieve a high rate of return. It's hard to have all of the great things and also buy at a price that makes sense and we get there generally by buying when there's an event. Historically, we waited from management to make mistakes and then we buy a stake from a disappointed shareholder to help fix the business. more recently were able to buy a great company because you know they don't like the cap the analysts don't like the capex budget for example or there's a a change there's a narrative around the company that's caused people to sell uh and you know that's creates opportunities if you have an insight or you can form a view uh that uh the market is wrong about a a narrative you can buy you know some of the great businesses at very attractive prices. So for us, it's a concentrated portfolio of what we think of as some of the best businesses in the world, acquired prices that enable us to earn really attractive returns. That's kind of the core kind of engine of our strategy. And then we also episodically hedge what we call black swan risk. We look for, you know, the event that could cause a market crash. And the way we manage that risk is by buying these sort of asymmetric instruments, credit default swaps, various kinds of options uh to hedge. And there have been three of those black swan risks in the last 22 years. In each case, we had a different way of hedging the risk. >> There's a few uh threads we want to pull on there. Concentration what you look for in a moat. But um before we um pull on those threads, I'm interested in the change uh of the philosophy over time because um sort of 10 years ago or early days um you were known as quite an activist investor. Um but in a recent interview, you noted that you haven't made an activist investment in about a decade. >> Mhm. why the changed over time. >> So in the beginning we didn't have a brand. People didn't know who I was. Uh the firm you know we took a stake in a company and and uh there was an opportunity for the business to be improved and we had a tough time getting into the boardroom so to speak. What changed over time is after enough of these sort of engagements where we took a stake in a company, we did our best to engage with management, they pushed us off and then we you had to get more sort of active the traditional activist playbook, running proxy contest, writing letters, giving presentations. The substantial majority of those worked out. People said, you know what, we should I think also a couple things happened. the whole sort of I think boards started to take activism more seriously and uh you know 23 years in we're very known quantity in markets so we take a stake in a company we're much more likely to to get a thank you note from a management team literally uh versus the old days we would get a might get a letter from a law firm or something >> they actually write a thank you note >> yeah >> we announced a bunch of new investments in the last quarter or so I think four of the companies. Uh the CEO wrote a thank you note. Dear Bill, you know, we're delighted you've taken a stake in our company. Glad you see it. You know, the opportunity. >> Wow. >> We didn't get that in the past. >> So, I feel like it's like a new Maybe just Wall Street has gotten more polite. >> Yeah. Yeah. Yeah. That must be nice for you to feel the love. >> Feeling love. What it really means is that if we have a good idea for a business, we can sit down with the CEO of the company. We can share it. It doesn't have to be >> proxy contest. And uh I think the the quality of the businesses we've been able to invest in over time has improved uh pretty meaningfully and um you know so we haven't had to be an activist right we're not afraid to be a very engaged investor but we can get that stuff done you know in a conversation in a boardroom as opposed to going on CNBC and making a pitch. >> You mentioned the the process around finding an enduring company practically like what does that look like? what what are you looking for in a moat and maybe some examples of current holdings that reflect that. I just pick any name in the portfolio but you know if you think about you know the Microsoft franchise right they're something approaching a half a billion people sitting at a desk working with the Microsoft 365 suite companies have come to trust Microsoft for you know security and it's a relatively low cost per seat product you know order you know 25 bucks something like this and that's a a market presence that's very very difficult uh in our view to disrupt and it's a it's a pipeline where you can sell through other AI, uh, Copilot, increasingly improving versions of Copilot. Um, so we like companies that have, you know, they're sort of an essential part of everyone's day. I mean, think of, you know, the Bloomberg in the in the hedge fund business. Every everyone in our industry has a pretty much has Bloomberg on on on their desk. You know, Uber, if you're going to get from one place to another, the probability that you're going to open up an Uber app, I think, is very very high. Now Uber is a is a stock under some controversy because the the theory is okay autonomous vehicles are a threat for example to Uber because Elon is going to just completely dominate that business with the cyber cap. Uh you know our assessment is there are going to be many autonomous vehicle companies autonomous vehicles are going to meaningfully reduce the cost of transportation reduce the cost. There'll be more demand for rides. People are going to want a ride on a timely basis at the lowest possible cost. And we think they get there through a platform like an Uber as opposed to going to uh each of several different you know we don't think every autonomous vehicle company's going to have their own mobility app you know that's the you know sort of an example sometimes brand creates mo you own a company called restaurant brands which is owns a sort of a portfolio of of global fast food concepts you know it's brand it's market position. Yeah. We've been doing this podcast for almost a decade and we've been following your your portfolios for almost the same period of time and one thing that's always stood out is your concentration is what what's the um what's the reason for concentration? >> I mean simply there aren't that many great businesses that meet all of our criteria that you can buy at a price that makes sense at any one moment in time. uh if we had to build a portfolio of a hundred of these, you know, we'd have, you know, 85 90 that were not as good as the top 10. >> Yeah. >> And the incremental benefits of diversification even mathematically, you know, the the adding the additional name to a 12 stock portfolio doesn't materially improve >> the diversification, if you will, >> and you're forced to own your 12th best idea as opposed to more of your best idea. >> Makes sense. Bryce said we've been following your 13Fs in your portfolio for a while. Another thing that has stood that test of time is restaurant brands. And I I feel like it's a good example of your investing over time because uh you know it was early days it was an activist investment and then when it was spun out you you and and merge you held on to um Tim Hortons. >> Actually it it wasn't an activist investment. So the history here was >> we took Burger King public by merging it with a spack that we controlled. >> Okay. in 2012 and then Burger King acquired Tim Hortons or restaurant brands acquired Tim Hortons. It was originally Burger King and they set up a holding company and then they acquired uh Tim Hortons. Uh we actually pitched management on the idea of acquiring uh Tim Hortons. They did all the work but we knew the business well because we had made an activist investment in Wendy's years before. >> Yeah. So in I think 2003 we took a 10% stake in Wendy's and we were a catalyst for them spending off Tim Hortons. >> Yeah. Okay. Yeah. And then today, you know, we we've been in America for a few days now and the fast food landscape is so competitive. Uh, and you think about like long-term sustainable competitive advantages. It's a tough market to be in. Um, but restaurant brands has been a mainstay for you. So, where's the moat for that business? Look, you know, when you get beyond a thousand stores, um, and you've been around, I mean, Burger King being a good example. This is a company that's been around for probably approaching maybe 70 years or 60, 70 years, and it was mismanaged for a meaningful percentage of that time, but the brand still survived. So, one great test of the strength of a brand is if it's managed poorly, but still exists, right? And now we think it's managed really, really well. >> Yeah. So you we like businesses that have these sort of royalty-like characteristics. We do prefer the capital-like uh business and this you know the business of once you create one little profitable box and you create a system you know you can inspire a bunch of entrepreneurs to invest their own capital u use a fair bit of leverage on their own but they can get to a very attractive return by following the system and that model the franchising model is a really powerful way for a business to grow at a very nice rate. So if you have a company that can grow without capital and they can grow their sales nicely over time, you own a royalty basically inflation protected royalty on this very good business. That's why we like the business uh generally and then if that business over time can acquire other uh companies in the space and you know over time you have this franchise system that permeates out and you know it's at a price point uh that you know even in a difficult economic environment we think it's a business that's pretty pretty secure. >> We want to turn to Netflix because you sold out in 2022 and now back in this year 2026. Talk us through the the change in thinking. what what was it that led to buying back in this year? >> So, we bought the stake um because we believed that Netflix would be the long-term streaming winner. We really liked the management team and they had had missed subscriber numbers. The stock had gotten crushed on that and we felt it was a price that would pencil out to an attractive return over time. After buying the steak, we went to meet with management which probably was a mistake in retrospect interestingly, but when we met with them, they seemed to completely agree with our thesis. We we actually took them through our typical presentation. You know, even the body language was good, if you will. 3 weeks later or so, they announced earnings and completely disappointed uh and the subscriber numbers were much lower than expected and it was sort of like management looked shell shocked, you know, with kind of the compare and contrast of the few weeks prior to the earnings call. One of the points that was made when we met with them, we said, "Look, why not pursue an advertising, you know, model for at least uh acquiring continuing the growth of your business?" and they're like we will never do this. 3 weeks later on the call they're like we're thinking about an advertising model. So we we you know something dramatically changed in a very short period of time. It caused us to lose confidence in the predictability of the outcome. We said look it's an excellent management team. We think the likelihood is they'll get this right but the the dispersion of outcomes I if they get it wrong it's going to it's going to end badly. So we said look let's sell uh because the you know we we're a very high certainty investor. We lost our conviction in the in the certainty of the outcome and also we have other alternative places to put the capital and shortly thereafter we put the capital into Google which also went through uh I guess there was a a high uncertainty moment but got it to a price that made it very attractive to us. This is when chat GPT was launched and they were >> perceived to be uh you know kind of well behind. >> Um but we we follow you know probably a few hundred companies that meet our standards for business quality. uh you know we watched Netflix stock go from well we sold at 275 I think it went to 175 probably should have bought it back then but we we didn't uh and then it went to wherever uh thousand something and then they dis they disappointed people again more recently or there were some concerns raised about you know the attention time that US subscribers are spending on on Netflix and the stock got cut in half but you know reassessed the situation uh they've very successfully built a kind of an advertising model you know they've really moved moved into clearly the number one position in the space. They've become a much more free cash flow generative business. So, we think it's a lower risk, >> as good an opportunity here and at at 50% off versus where it was even a few months ago. We thought it was an attractive >> entry price. >> Now, we promise we're not just going to go down all your list of holdings and ask you about them, but but there is one more group that we want to ask about, and you did mention uh the Alphabet investment there, >> uh, >> which we no longer own. >> Yeah, that that's what we were going to ask. So um you recently sold Alphabet uh but you do own uh Microsoft, Amazon and Meta still. So when you look at the big tech players as a group, why do you prefer those three over Alphabet? >> Princely price. I mean Alphabet got to a price that we felt the go forward return had dropped below kind of our long-term aspirations. We were able to buy Meta at, you know, very very attractive entry price. >> Yeah. >> So that was the answer. >> Yeah. While we've been over here, we've been trying to get access to MetaMuse because it's not launched in Australia yet. >> Yeah. Yeah. Have you Have you tried it? >> Actually, just on the way over uh Fran and the car was built. I I haven't yet. He says it's actually amazing. >> Really? >> Nice. Yeah, we're we're a few years behind in Australia. >> I'm sure they'll make it available, too. I mean the uh we we found it crazy when they launched Muse the you know the week after Metal was up what 20% or something and all those you know travel stocks and e-commerce stocks were all down because the market thinks that Muse is going to find us a better deal. >> It's amazing how much these big companies still move. >> Yeah. Yeah. >> You mentioned uh just want to pick up on that 100 stock watch list that you've got going. I've got to ask are there any Aussie stocks on there? >> No. And it's nothing against Australia. We're we're very much a kind of North American centric >> investor and Australia is just very far away. So far >> it is. It is. Yeah. >> Kind of forgotten down there. >> We'll um we'll give you a few names to research after this. >> I'm sure there's some amazing great companies. >> Yeah. >> I'm actually on my list of things to do. I want to go to the Australian Open. So, >> which is supposedly Many people say it's the best run of all of the >> Players love it. >> They love it. Except when it gets to, you know, 45°. >> It's warm. >> Yeah. Yeah. Yeah. But it is amazing. It's a great event. So obviously uh on that 100 stock watch list there >> it's more like a few hundred stocks. >> Few hundred stocks. Sorry. >> It's sort of like a we call it the library. It's it's a companies that we've gotten to know over a long period of time where we admire them for their you know business characteristics, growth characteristics and they're sort of like on the list. And so, you know, one of those companies, you know, we're in a market in which a 200 billion, $50 billion company can lose a third, 40% of its value on a on a guidance miss >> and that's when we kind of update the file. Yeah. >> Yeah. >> So, there would obviously be some names there that you love, but you just can't get comfortable with the valuation right now. Is there one that really stands out as like an incredible enduring moat, but it's just the valuation is a reason it's not in? >> I'm not going to reveal. >> Okay. >> Offline. Yeah. Yeah. Yeah. We'll give you some Aussie stocks after. We'll chat. >> Bill, you mentioned there um the you know the experience and conversations you had with Netflix management. Just broadly like how do you assess CEOs, founders? Do you have a mental checklist that you do in the first hour that you meet them? Are there sort of things that you're really looking for? >> I think one way to get a sense of a CEO is just go back in time. I mean today we have, you know, recordings of every conference call, right? Transcript. Um and one interesting exercise you can do you know look at the day the CEO joined the company and look what he said in the first call um follow you know read the next whatever number of years you know what did he say and then what did he do does he overstate what he's able to achieve or is he conservative in terms of his expectations uh does he follow through does you know I mean it's it's how do you assess character one way to do it is just do people do what they say they're going to do >> you have a very public record both in the financial statements and also in the statements the actual statements of the co then of course just there you get a sense of a person sitting across from them in a podcast for example you you start forming yeah >> I imagine AI has been uh hugely helpful in uh analyzing past statements and and how um founders and CEOs have delivered on that uh have you found AI uh really adding value in any other points in the investment process >> it's not really a core element element of our process today. You know, I think AI is a great device to accelerate aspects of a research process or to learn about a subject you don't know much about, but we've not systematized it yet. You know, I am sure that people who are much shorter term investors than us are finding it to be a useful tool, but it's not really been something yet. And we, you know, I'll leave that open that has played a made major changes in our approach. And Bill, just to close out on your portfolio, we noticed that you've got Visa, uh, Visa card, Visa and Mastercard in there. Why own both? Uh, >> they're both actually very similar businesses with similar kind of characteristics. Um, there was a technical reason why we bought both. So, we have an entity called Persing Square USA, which is a USlisted fund that trades on the New York Stock Exchange. By the way, that's a very cheap stock. It's trading today at a 23% discount to its liquidation value, which makes no sense to me. So maybe I should talk about it on a podcast and hopefully a bunch of people in Australia will buy some. But you get to own all the stocks that we mentioned at, you know, 23% off, right? That's a pretty uh pretty interesting thing. But the the rules on diversification for US listed funds require a slightly greater degree of uh diversification than for offshore listed funds. We have an entity called Purging Square Holdings in London. We can't put more than 25% of assets in any one name. But beyond that, that's the the only restriction on diversification. In the US, half the portfolio can be as concentrated as that. The other half we have to have no at cost an investment that's no larger than 5% of the portfolio. >> So by owning Visa, Mastercard, we can have sort of a 10% exposure >> to that business. And that's why we kind of led us to own both. >> Yeah. Yeah. Now, we've covered a lot of um the more well-known names um but we we actually think the most interesting story and one we want to unpack in a little bit more detail is a lesserknown name and that's um Howard Hughes holding and what you're trying to do there. >> So, the context for this is Warren Buffett and Birkshshire Hathway. And so, uh to get into this topic, we want to talk about um I guess your thoughts on Buffett and your relationship with Buffett. Um, you first met him at age 20 and uh, I believe you've queued up for the microphone at the Birkshshire AGM four times since. Bryce and I went in 2023 and unfortunately we couldn't ask a question. >> You couldn't ask cuz you the line was too long too long. Yeah. Yeah. Yeah. Um, >> tell me what we did line up for though. 4:00 a.m. we got to the doors and it was just crazy the amount of people. >> Yeah, it was. So I figured out a device to get a good seat basically. someone else >> like befriend some Columbia business school student that's very I said look I'd be happy to sit with you at Berkshire just get me a good seat >> that's great I think the business school student is probably more excited to sit with you than Bryce and I but >> that's a good strategy >> yeah it is a good strategy so I guess um talk talk to us about uh your thoughts on Buffett and um and we'll use that as the sort of in into how it is >> like in life it's very helpful to have you know people look up to sort of actual mentors for as formal and informal and he's been one uh for me. He's really the person responsible for getting me interested. I was interested in investing but you know I I built a strategy you know uh learning much of what I learned in the business I'd learned from him and you know great opportunity eventually where I I actually got to meet him and I'm a signator of something called the giving pledge and for a period of time Buffett would go and you know I'd spend a day and a half with him uh and that you know those these are great great memories. It's great to have people that you, you know, uh, you're honored to be with and you can learn from and he's really, uh, one of them. Uh, and I think he's been a leader not just in investing, you know, if you've attended the meeting, you know, the topics covered are very broad. It's not just like which stock should I buy and and why. Uh, so he's been important, you know, it's it's very useful to when you're thinking about doing something, for example, or investing, you know, what what would Buffett do? >> Yeah. >> Would he own it and if not, why not? And now over time you're going to develop your own approach, you know, as we we've done over time, but he was a very important uh and has been a very important um aspirational figure for me. >> If you could line up a fifth time and Buffett were to miraculously come back for another AGM, what would you ask him? >> I'd ask him, how is it possible you're so healthy when you drink seven cherry cokes a day? >> Yeah, that is a great question. >> Yeah. Yeah. Yeah. >> Yeah. It's got to be part of it's got to be an active mind, you know. >> Yeah, for sure. For sure. Who knows? Maybe there's something in the syrup. >> Yeah. >> Yeah. Yeah. >> We were stunned watching him 8 hours on stage. Lolly's Cherry Coke. >> I actually funny moment. I I had him for dinner at my house years ago and of course, you know, went on Amazon to order Cherry Coke because you can't buy it in the supermarket. And then asked him, you know, we're sitting down at the table, uh, you know, would you like Still or Sparkling? And he says, no, thank you. He said, I'll have a cherry coke. I said, fine. But I said, you know, don't you drink water? and he said, "Bill, I haven't had water in 48 years." >> Oh, no way. >> What a true story. >> Wow. Maybe we should all coke in. Yeah. >> Wow. >> The reason that we wanted to start with um Birkshshire and Buffett is because uh an important insight um on the Birkshshire business is uh a lot of the value comes from the insurance balance sheet and and we've heard you talk about this before. So, can you just give us that insight um to sort of set up the the Howard Hughes? >> So, first a book recommendation. There's something called the financial history of Bergkshire Hathway. So if you're kind of a geek in the investing world, you're interested in Buffett and Bergkshire. It's a guy who basically took every financial statement at Berkshire and followed progression of every deal, everything he did. And when you read the book, uh it becomes very very clear how important this is something I think we all sort of know but don't completely appreciate how important insurance has been in terms of driving the value of the business. Buffett bought control of this textile business basically at a discount to kind of working capital was you know very very cheap huge discount to book value I think that was the the attraction but for him to buy you know 50% of it or more he might have owned 80% by the time he wound up his partnership I don't know the the actual percentage uh he clearly had uh an idea to use this from more than it was you know just uh to buy a cheap stock cuz his old approach was to buy something really cheap and then there would be an event that would enable uh a catalyst to unlock value and here there was really no catalyst. So at some point he had made the decision I think that he was going to get out of the business of managing other people's money in a hedge fund type structure. You know Buffett never talks about the hedge fund days but the Berkshire partnership was a hedge fund 25% of the partnership. >> He was also an activist investor. You go back in the early days of of of Buffett were kind of shareholder activism, but he gave that up for the permanent capital of this entity and one of his first decisions was to buy an insurance company, company called National Indeed Insurance, but it it enabled him to have a vehicle to continue to invest in common stocks, but to do so in a public company. In the US, you can't buy common stocks in a traditional public company unless it's a mutual fund. and mutual funds come with all these restrictions on diversification and so on. Um insurance is sort of a vehicle to invest in common stocks but it really had not been used in that fashion uh by anyone really before before Buffett did. Um but if you follow his approach he basically took a very low risk approach to writing insurance business took all the float and bought very short-term treasuries be really no risk and that kind of freed up the uh kind of the equity of the insurer to invest in common stocks. And so when you hear Buffett invested $50 billion in Apple, it was the actually the Berkshire insurance operation. So that was a sort of very instructive lesson. >> So this then sort of leads into your plans with Howard Hughes. Before we dig into it, can you just introduce the company? >> Sure. So Howard Hughes is a company that we created many years ago, not because we were trying to make Howard Hughes a special company, but we were trying to make a company called General Growth a better business. Um, General Growth was a class A shopping mall company that got into trouble because they financed themselves in the CNBS or the securitized real estate mortgage market before the financial crisis. They were more aggressive in using leverage than their competitor and they basically blew up and the stock went down 99%. Because they were unable to refinance their debt going into a financial crisis. Now, interestingly, their assets were still doing well. They had malls that were had 95% occupied, beautiful class A malls, but the stock was down a ton. and we bought in about 25% of the company. Uh, and I joined the board and the plan was they're going to have to file for Chapter 11. They filed before I joined the board, but there's an there's a way for the shareholders to maintain their investment in the company because there's sufficient asset value to cover the liabilities. And in bankruptcy, as long as the assets exceed the value of the liabilities, the shareholders can retain their investment. It almost never happens that I think there may be one other example in a public context where it happened. Um, but usually the shareholders sell out. there's no one representing their interests. And so our activism here is we bought 25% of the company. We joined the board and we represented the interest of the shareholders. So the creditors all got their money back. But importantly, the shareholders kept their stake in the company. It led to our best equity investment. But to make general growth a more compelling company is the direct comparable with Simon Properties, which is the bigger mall company, which is really a pure play class A mall company. General Growth owned a lot of other ancillary assets. They owned land. They own a lot of development properties unrelated to malls. So, we took everything that was not a class A mall. We stuck in this little company and it was, you know, I wouldn't say it's a pile of junk. It was a lot of really interesting assets, but there wasn't like a coherent theme to it. And we needed a very entrepreneurial team to kind of work through it, which we did over more than a decade. And then we got the business to a very interesting core, but one that certainly doesn't fit into a short-term oriented marketplace, which in the core business of uh Howard Hughes today is we own these small cities. And I by own, we own basically all of the commercial undeveloped land, all of the undeveloped residential land. We sell the we kind of build out the uh infrastructure and we sell the lots to home builders who build homes. That brings people into these communities. That drives demand for shopping centers. We'll build a shopping center to meet the demand. We'll build apartment buildings to meet demands for apartments. We'll build office and so on. And this has been underway, you know, in the city called the Woodlands for probably 60 odd uh years. And then we another city started in the early '90s, city called Summerland in in Las Vegas and one called Bridgeland in Houston. And we also own a 60acre parcel on the beach in Hawaii. We build condominiums. But it's not your typical public companies. Uh even in the real estate space, you know, there's kind of a defined model for REITs. Like you're either an office REIT or you're an apartment RE. You have to have one property type. You pay dividends. You don't do very much development. So we don't pay dividends. We do a lot of development. We own a lot of land. So it's been this sort of orphaned very cheap stock. We've been trying to decide what to do with it over time. And then actually a decade ago, Forbes wrote a cover story. Never be on the cover of Forbes. after after being on the cover for four was like the at the fan. All kinds of bad things happened, but the cover story was Bill's going to take Howard Hughes and turn it into the next Bergkshire Hathway. And the stock went to like $160 a share and we didn't do anything and the stock went way back down. And then we okay, that's not a bad idea. And so what we've done over time, the plan as of uh almost a year and a half ago is we bought a significant stake, additional stake in the company that put 900 million of capital in. We announced a plan to transform Howard Hughes into what we call modern day Bergkshire Hathway. And the way we're doing it is we're kind of monetizing real estate assets. That's a process we're going to accelerate. And plus the capital we put into the business, we used to buy an insurance platform, a company called Vantage. And like we do in our typical active investments is we recruited what we believe to be the best insurance management team in the industry to run the company. So the insurance team is going to manage the liabilities. that is they're going to write insurance policies and we're going to manage the the cash that comes from writing those policies much the same way Buffett did which is we're going to take the float this is the premiums you collect up front that you eventually will have to pay out in claims hopefully less than you collect and that money is invested in short-term treasuries where we take no risk and then the balance which is about 40% or so of the assets the company we're we invest in common stocks and so the goal is to build a compounding machine like Bergkshire um and what you know the beauty Beauty of insurance is it's a highly cash generative business. So if you can manage a profitable insurance operation and you can invest the assets and earn attractive returns that business can compound at a very nice rate over time and that's basically what Buffett has done over time. a successful insurance operation and then you know intelligent management of the assets and that's the simple playbook and then not issuing stock >> right Berkshire had a million shares >> back in the 1960s and only when he acquired Jen Reed did the share count grow to a million and a half >> uh and now they're canceling shares and so it was he drove a lot of underlying intrinsic value and he didn't increase the share count >> and that was really the the big driver of the the value and we're going to work hard to do the same thing >> and Why does it make more sense to do it in the Howard Hughes vehicle rather than start a new company like Persing Insurance Company and and do it as as a wholly owned new company? >> Uh the the answer is uh one it takes time to ramp up an insurance company signative period of time to develop the get the licenses start to have a market presence have a name where you can start uh writing business. So one it made sense for us to buy an existing asset and we bought one that was you know call it 6 years old. So we're not stepping into pre2020 liabilities and there's some scary stuff in the uh to worry about an insurance in that sort of period of time in history. But the other thing that enabled Berkshire to be successful is it wasn't a pure play insurance company. It was really a diversified holding company. And that diversification uh one made it easier to step away from the insurance business when it didn't make sense to write business because you could had other things to do with the capital. also made for a much stronger uh you know creditworthy enterprise because you're not entirely exposed just to the insurance sector. You had you know Berkshire over time built out exposures to other uh businesses that were not correlated with insurance. The other thing Buffett had was you know he owned a meaningful stake in the company half we own so we have 47% of Howard Hughes it's public company of meaningful scale. Uh we are we acquired an insurance asset that's already sort of running. We've brought in an excellent team to run it. So, it's a much faster way to build. >> Yeah. >> Uh something that if we literally started with a blank sheet of paper and had to, you know, go raise capital and >> tell a story would we probably pick saved probably four years. >> Yeah. >> And you know, I'm 60. >> I think that's still very young, but you know, >> I don't want to wait till 64 to start. >> Yeah. You got to keep drinking the cherry Coke. That's the the secret. >> I've I've taken a very different approach to Mr. buffet to the food that I eat. Yeah. And the stuff I drink. >> It's such a great playbook investing the float. Why aren't more insurance companies doing this sort of diversified investment approach? Why aren't there mini Birkshars everywhere? >> So, a few things. One, insurance companies are in the business of insurance principally. And if you're going to have common stocks as part of your portfolio, the sort of capital charges for that are higher and it means you can you have to write less business. So, if you're like an insurance person and you want to just do insurance, this will limit you somewhat. Uh the other challenge for insurance companies, if you're a great investor, you know, you're 28 years old and you want to this is a career you want to pursue today, you go work for a hedge fund or you go to Fidelity or you go to a long only shop. No great common stock investor wants to go to work for an insurance company and the pay scales that are offered at insurance companies, they just can't compete for talent with Citadel. And so, uh that's why their portfolios are almost, you know, 90 90 to 100% fixed income. and they're like, "Look, let's not worry about the asset side of the balance sheet. We'll just do fixed income investing and we'll focus on the on the liability side." If you can do both, however, you can really drive the returns, right? Because if you earn high return on your assets and you have a very low cost of liabilities because you run a successful insurance operation, then you can have very that's basically what Buffett did. And we're starting relatively small, not a small, you know, national indemnity thing, I think, was an $18 million acquisition. you know, Vantage is was a, you know, two billion 2 billion dollar or so uh acquisition. Um, so we we didn't want to start too small and we recruited the team that managed a mass a much larger business. Bit like bringing in an asset manager who was managing hundred billion to go manage a billion dollar portfolio. >> You know, their ability to do things, the relationships they bring which are actually relevant in insurance or will enable us to really accelerate the build out here. I think. >> M. Now, Bill, on our podcast, we do a segment where we get experts to review the portfolios of our community members. Um, and we thought there's no better opportunity than to put our portfolios in front of the most prominent expert we've ever had on the show. >> So, we have uh >> I hope I don't disappoint. >> If you say mine's a bag of that's fine. >> I'm a bit nervous about it. Now, what we've got is just our individual US holdings. Um, and we'll I'll flick it around. There are five that we actually own together. So, perhaps if you could address those five and then there are some individual ones where we split. So, I'll flick it around. You can kind of see >> what we've got. >> We we recognize we really are putting you on the spot here. So, we'll we'll pat a bit so you can give a chance. >> Now, you don't know. >> I can only comment on businesses I know. that time. That's time. >> So, one, Alphabet, I think, is an amazing company. Um, I think the price, the valuation reflects a lot of that amazingness. Um, but I think, you know, in in a world where people are concerned about hyperscalers and everything else, you know, they got a very powerful franchise. Um, now the search bar is just a way to get access to cheap AI today. That's sort of how I think about it. And that is a reasonable place to go and people are still going there and they're they're managing the cost of the of of that business I think reasonably well. You know, I think that I think it's a great franchise, but I think the market sort of already knows that. >> How much waiting do you put on things like Whimo and their other sort of businesses that are going on the side? >> I I don't think they're really that material. >> Yeah. >> Uh Axon is like the taser uh camera company. I don't know the business well, but I think there'll be more tased people and more more body cameras. So, I think there's unfortunately the uh your kind of long crime. So, if you want to >> long crime Yeah. Yeah. >> that seems increasing like if you look at the uh what's going on in the streets, I would say, you know, that's a business, you know, security is going to be I think there's secular demand for security and also transparency and accountability. So, that's a play on that. But I just don't know the business or the competitive landscape. >> Fair. Yeah. >> Okay. Uh Eli Liy, uh this is a play on fat people. >> Yeah, absolutely. TP1. Yeah. Long >> term. >> They're a lot fewer. Look, I think that's become a much more competitive space. Um and uh you know, I've generally not been of an investor in the kind of the drug companies because it's, you know, you it's a interesting business model where you invest a ton of money. It takes years uh to ultimately get an approved drug and then you know whether that drug is successful with the competitive landscape. I I don't totally love the business and a lot of drug companies today actually don't develop much. They just use their kind of distribution capability and they're buying, you know, they're buying the the stuff from others. Don't know the business well enough. You know, Berkshire is a very very safe place to put your money today. Um and uh but you know, I I think it's going to take time for Greg >> to get his feet under him to do things that are really move the needle. I didn't I wasn't that inspired by a $10 billion investment in in Alphabet at the time. I was a little bit surprised by that. I mean, they got it at a 6% discount, but so what Bergkshire to move the needle is going to have to do things that are if if I were running Bergkshire, I'd focus on things that required 100 billion of capital, >> not a billion, five billion. And I think part of that is, you know, you're a new CEO. It's a very tough job to take over, right? you're following the most iconic investor of all time. The company's sitting on hundreds of billions of cash. Um, they'll be in a very good position if the world blows up. So, if that's what they're waiting for, I think they're well positioned. I'm sure their insurance business continues to be excellent. They own a lot of really sort of good smaller uh businesses. >> Do you think Greg's the right guy to make the 100red billion decisions? >> Uh, you know, I don't think of him as much as an investor than I think he's known more for being a very good operator. I think he's a very high quality person. Uh, so I think he's a good choice. You know, integrity, hardworking, all the things that you'd want in a in a leader, but I don't think of him as a This seems like a a moment where the ability to write a hundred billion dollar check is something that is differentiating. >> Um, you know, buying just some securities in the stock market, I think, is less less really a competitive advantage for Berkshire. >> Yeah. >> Yeah. Spotify is a business. I I'm very impressed with Daniel Ek in terms of what he's achieved with that company because our view was that the Universal Music of the World had a better market position than the distributors of the content and Daniel actually has done a vastly better job uh than the the music companies themselves that ultimately uh you know control the IP. >> Uh and I think that actually the stock has gotten cheaper recently. >> Yeah, it has come off a bit. >> Yeah. So of all the things on the list, I think that to me is the most interesting. >> Okay. Okay. >> So that closes out the five. On my side, I have two healthcare companies, Intuitive Surgical and Transmetics. >> If you have a view on either of them, would love to hear it. But >> so uh I'm building this brain institute >> and uh just two days ago I was at Mountsane Hospital and they were showing me how to these uh it was it wasn't I don't think it was Da Vinci, so it was a competitor. A dam. >> Um, >> but it was it's actually super cool how how you know you you sit there with little joysticks. >> Yeah. >> But these little pinser things and you were having me try to you know tie a knot to to connect >> uh like a vein you know sew a vein to one. It's it's pretty amazing technology. I just don't know the details on the business. >> And look there's a there's a long list that I've got there. So I'll just uh I'll talk to the theme and I'll just get your view on the theme which is the uh emergence of uh like the quote unquote super apps in emerging markets. You know the micardo libre in uh in Latin America and the sea holdings in in the Asia Pacific. Do you have a view on that uh emerging technology theme? >> I don't I don't know the business is well enough to really give you a good answer. Marca Libre sort of popped up for me because again another stock that's gotten cheap recently. So, at least worth a look >> on just um the stocks getting cheap recently. Something we've noticed that is emerging, which is like at a surface level on the index, what the S&P 500's up 14% this year, but there's a lot of weakness under the surface. There's like a hidden crash almost and a lot of great stocks are are falling. What's your view just on on the opportunity set that's emerging today? >> I think it's excellent. uh you know we've we raised this Persian Square USA entity in April and we had five billion of capital to deploy and we were able to deploy it pretty quickly in businesses in many cases we've never been able to own they've been on the list of things we'd aspire to own but but at 35 times earnings we didn't want to own >> or 31 times earnings Visa you know we love the business and we were able to buy it in the low 20 multiples so I think it's actually a very good time to buy these sort of high quality compounders as long as you can have confidence um in the you know that the risk of disruption is And that's really the key >> uh analysis that you need to do. >> Yeah. It's an interesting dynamic where like passive investors are just riding the you know the index grinding higher. >> 41k is doing great. >> Yeah. Yeah. Yeah. And then active managers like uh we see it in Australia. I'm sure you're seeing it in the US like a lot of active managers are getting smoked at the moment. >> The best time to invest with an active manager is when they're kind of getting smoked. >> Yeah. Yeah. Yeah. Um >> we've had our share of smoke this year. >> Yeah. >> We have one investment. Well, it's really two. Fanny May and Freddy Mack. These stocks went from four to like 17 last year. We're the largest shareholders of both. These are effectively, it's a duopoly. It's a royalty on the US, you know, uh, mortgage market. They've been in conservatorship. They were taken over by the government during the financial crisis. They've been able to rebuild their capital. They should be released from conservatorship. They still trade in the what's called the pink sheet over the counter market here, which is sort of this tertiary market. Um, but the president last year started tweeting about them, getting everyone excited about that he was going to release them from conservative stocks went from 4 to 17. This year the stocks basically have gone from wherever they began the year down to $4 a share. So, if your viewers are looking for an interesting riskreward, I think it's likely that post midterms, regardless of which way they go, and maybe even more so if they go against president, relisting Fanny and Freddy on a real exchange, resolving some historic issues with the businesses and releasing them from conservatorship. As a business, they're trading at something like one times earnings, one and a half times earnings. You know, these are businesses probably worth 20 times earnings. You know, this is a 10x. If the president puts this on a list of things that he's going to do and I think if midterms go against the president, this is one of the few things he can do without the congress and the president likes to do big deals. You know, he likes to ring the bell at the exchange and this is something we can create literally hundreds of billions of value for the American people. So, it's hurt us this year. Probably cost us 8 900 basis points of performance. But, you know, post midterms, we think it's a pretty interesting. >> So, those folks in Australia should take a look at Fanny and Freddy. >> Yeah. Love it. Well, Bill, to close out, you're speaking to hundreds of thousands of investors, many of which will be listening in Australia. What what advice do you have for them? >> My advice is that one huge advantage that a uh individual investor has versus the institutions is maybe other than your partner, spouse, or whatever, you're not you don't have an investor base that you have to respond to. uh and uh if it's money that you don't need and and if you should only really invest money in the market that you're not going to need to cover your expenses in the short term and you can take a long-term view, I think you have a huge competitive advantage because the markets have become so short-term that there's enormous volatility. And if you do your homework and you you put together your list of companies you want to own, there's going to be a moment whether it's this quarter, next quarter, or you know there's a war, there's an event, there's some macro event where one of the really great businesses the world becomes available at a really attractive price. You buy a business like that, you never sell it. You compound taxfree. That to me is the best way to make money. And I think individual investors have it's really permanent capital because again you if you need it to buy a house, it's different. But if you have money that you don't need for 5 years, that gives you a real competitive advantage. Then a guy who works for Citadel has got to make money next month, otherwise he's toast. >> Yeah. >> And I think that's a that's increasingly an advantage in my view for the individual investor. >> Love it. Well, Bill, I think that's a great place to leave it. Thank you for joining us today. Uh this was a real pleasure. Enjoy. And I'll hopefully come see you. Uh >> yes. >> Yes. Yes. Down. Long way down under. >> Thanks, Bill. This podcast is intended for education and entertainment purposes only. Any advice is general advice and has not taken into account your personal financial circumstances. Before acting on general advice, you should consider if it is relevant to your needs. If unsure, speak to a financial professional. The host of this podcast and their guests may have positions in the companies mentioned. Equity Mates Media is part of the beta shares group but maintains editorial independence. We operate under Australian financial services license 540697.