Austin Lieberman - Squash The Beef
Austin Lieberman stops by The Business Brew for a special “squash the beef” episode. Austin and Bill are mortal enemies stemming from a classic “value vs growth” bet. Please see this GoFundMe link for details https://www.gofundme.com/f/fintwit-war-value-vs-growth?utm_campaign=p_cp_url&utm_medium=os&utm_source=customer.
While Austin and Bill are not actually mortal enemies, they did disagree on their investment philosophy. Austin is more focused on faster growing companies than Bill has traditionally focused on. Their style differences caused them to talk past each other. One day Austin told Bill that the problem with “value investors” is they think there’s only one way to invest. Bill realized Austin had a point, which upset Bill (mostly because he hates being wrong).
That conversation sent Bill on a path to study other styles. For that, he is grateful to Austin. More importantly, Bill is also grateful to Austin’s military service. Austin served as a Tactical Air Control Party (TACP) Officer in the Air Force. He talks about how that influenced him as a person and as an investor in this episode.
This conversation is light hearted, good natured, and a fun way for two people from opposite ends of the investing spectrum to come together to talk investments.
We hope you enjoy and are entertained.
Album art photo taken by Mike Ando.
Thank you to Mathew Passy for the podcast production. You can find Mathew at @MathewPassy on Twitter or at thepodcastconsultant.com
+ Transcript
Bill: Ladies and gentlemen, welcome to The Business Brew. I'm your host, Bill Brewster, here with a special Squash The Beef special with Austin Lieberman. Some of you may know us as the two people that are in the growth versus value Twitter war, but it's far from a war, and I've gotten to interact with Austin as a byproduct of that little exchange, and I've gotten to like him as a person, and I'm looking forward to learning more about him today. So, as a reminder, none of this is investment advice. It's not an invitation or solicitation to buy or sell a security. Do your own due diligence. It's all entertainment, and we could be wrong about everything we say. So, assume that and go out and verify everything. With that said, Austin, how you doing, man?
Austin: Hey, good. The only reason my assistant said yes to this was I thought it was the Morning Brew podcast, not Bill Brewster's podcast. So, I don't even know what I'm doing here.
Bill: Well, it could be because I lied to your assistant. This is all just a way to get you on so that we could create some entertainment for everybody else.
Bill: Yeah. Beef sells, right? No, I'm kidding. [crosstalk]
Bill: It does indeed.
Austin: I don't have an assistant.
Bill: After we publicly squash the beef, do you think that it will disappoint some people that we're not mortal enemies?
Austin: There's some people that probably love that stuff. So, we're probably each going to lose our massive followings after this.
Bill: [laughs]
Austin: And our Twitter fame and our podcast fame is over, after they find out that that we're not enemies.
Bill: Well, it was a good run. Unfortunately, they're going to have to tell or hear me tell you that I'm thankful for your service for our country, and I appreciate what you've done to keep us enjoying the freedoms that we do. So, we can start there, and thank you very much.
Austin: Yeah. Thanks, Bill. That means a lot. When you asked me to be on this podcast, I was thankful and honored. I love what you've done with the podcast, the discussions you've had, the things you talk about, the guests that you've had on. I know you don't optimize towards special guests or follower numbers or anything like that. But when you see some of the people you have, and the next people that I'm sure you're going to have, it's like, “Why are you having me on here?” But I think we're going to talk about a lot of good things, and then the last thing I want to do is apologize. I want to apologize to you for the way that I acted towards you publicly on Twitter without-- It was a while back and I don't remember exactly how something started, but I know where all that stuff comes from is like, some type of insecurity I was feeling that day or whatever, and then venting through ways that you shouldn't vent, and just looking for people to disagree with and people to fight with.
Bill: Ah, dude, I reciprocated it. It's all good. [crosstalk] shit. But I was doing the same thing. I was on the golf course, and I was like, “Who's this motherfucker coming at me?” and then I was like, “Let's just put some money on this. Shut up.” [laughs]
Austin: Yeah.
Bill: But you know what, man, so you say why would I have you on the podcast, and I'll tell you why. That exchange and how you came at me and the thing that you said to me that I will not ever shake, is you said, “You value guys think it’s the only way to do it.” And I was like, “You know what? Even though I don't like what this guy is saying to me right now, he's right.” That actual conversation or whatever exchange is what got me hyperinterested in how you came up and how you learn and how you look at the world. I did a lot of my due diligence through the homie, Matt Cochran, who I've gotten to know pretty well. He explained to me a lot of the way that the Fool looks at things, and I thought, “All right, you know what? Maybe there's more truth to what Austin's saying to me than I'd care to admit.” So, I'm actually really grateful for that exchange. I am also a little apologetic for how I acted towards you, but as value guys, we get a little bit offended after years and years of taking a beating.
Austin: Yeah, well, I think we can end the podcast there with you admitting that I was right.
Bill: [laughs] You have a long time to figure that out, sir.
Austin: [laughs]
Bill: Also, by the way, let's plug real quick. If you don't know what happened, Austin was pitching Zoom as an idea, which we will cover, but you ultimately ended up selling and I want to talk to you about how you came to that conclusion, and regardless of whether or not you're right on the bet, you killed the trade. So, hat's off to that. I was pitching Qurate. I had a special situation idea that was straight out of Greenblatt. Austin had the most perfect growth company ever at the most perfect time ever, and it was a classic example of the two of us talking past each other, I think, because of what we were looking at. I said, “All right, well, let's bet this,” and all the proceeds go to suicide prevention. I wish I could recall the name of the charity, but I will put the link in the show notes. We've raised over $5,000 so far. You and I are going to do $2000, whoever wins is going to not be on the hook. So, Austin, I have $4000, and if people are listening to this, please sign on. We've exceeded our goal, but I'm going to up the goal before this run so that we can hopefully raise a little bit more. So, that's some of the backstory here.
Austin: Yeah, that's awesome, and even after I win, I'm still going to donate the $2000 or whatever we agreed to.
Bill: [laughs] Well, dude, now your big time with social capital. So, you’ve got to flow it in.
Austin: Just got lot all the money. All money.
Bill: [laughs]
Austin: Yeah, first of all, it's a great cause, and I don't have it in front of me either, but I'm sure you'll throw the link in and then we can continue sharing it out and stuff. People's response to that was really cool, too.
Bill: Yeah, it was. I think it's the National Foundation for Suicide Prevention or something like that. I should know it off the top of my head, but I haven't looked in a while, and I'm not great with specific recollection at times, especially when I'm on the mic.
Austin: Yeah.
Bill: Which is why I try to tell people to do their own damn due diligence. [laughs] I can say stuff that's not exactly accurate at times. So, I copped to it at least.
Austin: The comment you said about it made you when I said value investors think that that's the only way or whatever. I think, A, I consider myself a very inexperienced investor compared to a lot of people out there, but one of the things I think I have learned, just through experiences in the military and in different jobs is just, especially in the military, is that in a lot of situations, I guess you could say gone up against or encountered people that have done things one way for a really long time. They keep-- I'm not saying that this is what you were doing, or what all value investors are doing or anything like that, this is probably just where I was coming from when I said that. They keep doing things the way that they're doing them just because that's the way they've always done them. In a lot of cases, I've had to-- It was because of the job I had in the military find ways to-- [crosstalk]
Bill: What was that job? Can you talk about it?
Austin: Yeah, sure. I'll probably go into the background of all this, but it basically is to find ways to understand why we were doing things a certain way, and what other ways there were to do them, and then weigh the pros and cons of each. The reason that was so important, and it's something I'm so passionate about is because the job I have, or I had in the military was could literally come down to life or death. And so, my job in the military was, I was a tactical air control party officer. The abbreviation for that is TACP, and I was in the Air Force, and what TACPs do is we do close air support in the Air Force. So, what that means is, we're in the Air Force, but we are usually aligned with or embedded with army units or marine units or even the Navy or other international militaries, and it's our job to basically connect them with the Air Force and get air support for missions like convoys going out on the ground, or reconnaissance missions or something like that going out on the ground. We do a lot of planning, a lot of liaising, a lot of understanding how the different organizations that we're working with work, what their mission is, what their goals are, and then it's our job to incorporate close air support. There's ways you request that, and so we make sure that there's fighter or bomber aircraft on station at the right time to provide safety and coverage for these missions. And that includes-- we've got radios, and the ability to talk to pilots up in the air, a lot of different equipment that tells us where we are on the ground, where potential targets are, potential enemy, where other friendlies are. We're tracking all that stuff, and then ultimately, our job is, we are the clearance authority for those aircraft to be able to-- we give them permission or clearance to drop ordnance or drop bombs on the battlefield in close proximity to friendly forces and potentially civilians and stuff like that. So, it's a very detail-intensive job.
There's a leadership perspective, so I was responsible for teams of people, and then also making the decisions of who's aligned with what units who would go on what missions, and then there's times where you have to tell people-- you've got to be just very straightforward and upfront with people, and if they're doing something dangerous, or something that can get other people killed, you've got to be super blunt with them, and you can't take BS or take stuff from anybody. So, a lot of my personality traits and the way I am, and the way I come off stems from eight years of doing that, and I'm constantly working on how to be more tactful, and work with people better and communicate better. But then sometimes it's just like you default to what you're used to, and so sometimes that my worst times like that stuff comes out. But it can also be some of my best times too, and it's these things are what make us who we are and their strengths, but they're also weaknesses, and we just have to be aware of that.
Bill: Dude, you pissed me off, but I kind of came at you too. The thing is there's two ways to act in the world, I think. The first way is to assume that you're correct, and everybody else is wrong. I think that the reason that-- when you said to me that I think that there's only one way to do things, I think the reason that that shook me so hard, is I like to take some pride in not thinking that I'm right. I like to think of myself as somebody that's open minded. And when you said that to me, it exposed that I wasn't. I don't know, man, I had to reevaluate some of that stuff. Honestly, man, it cost me a shit ton of money, because I never listened to you guys on SaaS for the longest time. I was like, “Oh, it's too expensive. It's too expensive.” Because I didn't listen, I never opened my mind up to why people were willing to look past a lot of the issues that I was complaining about.
Now, whether or not-- I think there's a couple ways that you can argue things. You can say, well, I may be right in the future, but the fact is, if you get your ass kicked over and over and over again for a long enough time, you were wrong. Now, I guess that's a little bit not the most accurate thing to say, because the pure value guys, you're going to be like, “Well, it's all about the cash flows, discount,” and I get that. But some of it too is morphing to the environment that you're in. Because if it takes you 30 years to be right, you just don't have the staying power. So, I missed a lot. That was right under my feet, because I was so convinced that there was only one way to look at the world. I’m going to try to change that going forward.
Austin: Yeah. The hard thing about investing though is it's a moving target writer, and so now I'm more in the camp of the last half of 2020, and really the last quarter right from November or October, I get my months mixed up. October on, things just got crazy. SaaS valuations and software and tech valuations just got too extreme in my opinion. I’m not even-- I tweeted about this on a month or two months ago, talking about how I thought that a lot of those companies now are or were overpriced, and so now they've pulled back-- and the thing is, Twitter is awesome, but it can be dangerous too, and so I tweeted something like that, and then you just have people come out of the woodworks talking about it, “Oh,-“
Bill: Especially you, dude, because-- [laughs]
Austin: -you trade in and out, blah, blah, blah,” and it's like, okay. These companies are great companies, but some of them were up 3x to 6x in 2020. So, that means-- and this is what happened with Zoom. That means that your five-year thesis has basically played out in a year, so you're wrong for selling when you're up whatever, 500% in a year? No, come on, you got to use-- It goes both ways, is all I'm saying.
Bill: Dude, I know. I feel you so hard, because I would think that's so wild that you went through that because if I'm remotely accurate on how you came up and learned how to invest, I think that the pressure that you would have from the community of followers that you have is-- but I thought that were supposed to be never sell, and you should prepare yourself for a 50% to 70% drawdown in any given name at any given time, and it's all about being the last to sell, and here you are, almost taking the value approach and being like, “Whoa, whoa, whoa. This is so egregious that I have to morph my rules.” Where I'm from the camp that's you only have to look at cash flows and, God forbid, I invest in something like Twitter, where I admit that maybe on today's product, it's rich, but I like the asset base and can think I can see where it can go, and by me, shoutout to Dave Kim at Scuttleblurb, my man, Elliot Turner, they hammered some stupidity out of me. But it's just funny how you and I are dealing with opposite ends of the same spectrum.
Austin: Yeah. You are right about the way that I learned to invest was brought up as an investor. It was through-- I got introduced to the Motley Fool by somebody-- The very first duty station I was at, there was somebody that was kind of a mentor to me, and we're in the office and he was looking at his investments, and he just started talking to me about how he had made 90 grand owning Netflix. He bought it at, I don't know, $6 a share or something like that. And then it had, I don't know, gone up 10x or whatever. I don't remember the exact numbers. This was back in 2012, 2013. The way that he found out about Netflix was through the Motley Fool. So, this was somebody that I respected and looked up to. He was a good leader in the military, he was a good like-- he was a professional that I looked up to, but then he was also in a good place financially, and that's where as a young brand-new officer, that's where I wanted to be when I was at that point. So, that was how I learned about the Motley Fool. I became a subscriber, I started doing some freelance stuff for them, wrote some articles for them, and then and that's ultimately where I got to know some of the investing guys.
But I'm very much still have the David Gardner camp, and you know what, the track record David Gardner has is, it's hard to match for anybody over the past two to three decades. But he also doesn't-- he's got his own portfolio, but he's not managing live a real-time portfolio. He's doing these recommendations once a month, and it's like a machine, where it's like, “All right, well, now the weight of those old picks that are just massive, massive winners are what's driving the significant outperformance of those portfolios,” and if you look a lot of their recent-- and I'm still a fan of the Motley Fool, but a lot of their recent recommendations aren't doing as hot.
So, nothing but respect for David Garner but when you're making a recommendation every month, it's a lot different than what I just moved into which is-- at least in my opinion, which is managing a bulk of money without new cash flows coming in. The thing to be conscious of is just the different business models. The Motley Fool is at least those two services, stock advisor and rule breakers, great for people that are constantly adding to their portfolio, and growing portfolios. But when I had a bulk of money, and it's like, “All right, I need to invest this money,” I wasn't going to invest it in Zoom or Datadog or whatever, when they were at whatever they were 50x, 60x sales when they were already like, known stories by that point. So, yeah.
Bill: You know what, I'm so glad we're having this conversation, man. I'm loving this. I say the same thing about Buffett. It's like people say, “Well, he never sells,” and it's like, “Yeah, well, he's not running a personal fund. He's running Berkshire.” Never selling is basically a marketing thing for him to acquire new businesses to buy in the private market. He wants more private market exposure. If he takes a draw down his riches could be like, he's the best industrialist. Maybe I guess Bezos passes him or whatever, but what he has built is the most beautiful combination in my opinion of love of finance and industry. It's an impenetrable machine. So, yeah, he doesn't actually care if Coke has a little bit of a drawdown. That's a lot different than if you're managing your personal capital and need to retire, and something is selling at a huge multiple. He didn't get to where he got by holding things that got egregiously expensive. He just didn't.
Austin: Yeah. I'm not super knowledgeable about Berkshire, but they've always had a pretty large cash position, and then not just cash, but then the ability, because of their stability of their business and their credit rating all that stuff, to borrow if they ever needed to purchase a new company or something like that. So, you’re talking about never sell or whatever. It's like, yeah, they've had this huge elephant gun or whatever they call it to where when things got really cheap, they could go purchase businesses at the worst time for the other businesses, and then that would make up for a lot of the potential dip or whatever, but--
Bill: Well, how did David hack what he needed to do to implement his strategy? He created a subscription company. It's a beautiful business. He's always got cash flow coming in. How did Buffett hack what he needed, he uses insurance float? Why might Buffett not have taken a little bit more of an aggressive approach? If he was being aggressive on the insurance side, then maybe he had to lay off some of the investment side. Now, you're looking at him an investment guy saying that-- not you, but people, and it's like, “Yeah, well, he's using insurance float to invest in one of the biggest energy companies in the US. And by the way, he bought a rail line like BNSF, that he can--" You start to see how those cash flows can interplay, and it's like, “What a--“ If you look at it like a piece of art, it's just like, I don't--
People can have beef with it or whatever, and maybe it's not a great buy today. That's fine. But appreciating what he built is incredible. I guess that for me with the Fool, I grew into an investor through Buffett, and I default to distrusting a lot of financial service products. When I first saw the Fool, I saw this sort of hokey newsletter that I thought was probably going to do a disservice to the average person. Once again, rethinking foundational assumptions, thankfully through Twitter. I've interacted with people that have come up through the Fool, and I realized how much good they do for people that are willing to learn, and that's no different than value investing in a completely different way. If you just listen to Buffett, and you're like, “Oh, I got to take these huge, concentrated positions,” and you don't understand the amount of work that that guy does before he does it, you're going to get waxed. In the same way that if you don't understand what the Fool is really about, and you implement it, and you have your first drawdown, and you sell, you're probably going to get waxed.
I guess that the reason that I’ve become so obsessed with it is it's like the exact opposite. But I actually think it's really similar. When you really cut down to the foundation of what they're both trying to do, they get to the same place in a completely different way, and there's something really interesting about that.
Austin: Yeah, the Motley Fool, my first interaction with them actually was before I had that talk with my mentor back in 2012, and the way I first saw them was, I saw some of their marketing, and this is back then, and I was like, “This is a scam. This is a--"
Bill: Yeah, dude. That’s what I thought.
Austin: “--a joke, a rip-off.” Yeah, so I immediately wrote them off, and it took a friend who I respected that had been a user of their services and had a really great outcome for to open up my mind-- “Okay, this isn't a scam.” I think you'll eventually probably interview David Gardner on this podcast, I don’t know. [crosstalk]
Bill: I hope so. Come on, David. Jesus. They have this rule, man. And you know what pisses me off the most about it is, he's the rule breaker. Break the rule, David. It’s worth it, man.
Austin: Break some rules. But he's come out and said, I think he said this on the podcast even that because their marketing is still pretty similar today as it was back then, that was one of the things that made me the most mad, as even just a freelancer for them was the marketing. Because to me, it wasn't what the real service was like, and but his take on it, and I guess this is the marketing teams’ take or his take or whatever, and I don't want to necessarily put words in his mouth, but he has said this on podcast, was he views it as the highlight reel of a movie, or the previews of a movie, is it's going to show you all the most exciting, and the best parts of the movie to get you hooked, because they truly believe it's going to be a good movie, so once you sit down and watch it, you're going to enjoy it. That type of thought, I guess is what has led to the marketing for the Motley Fool, but still it frustrates me to this day, when I see some of those triple down buy alert ads and all this crap. It's like, “Y'all are better than this.”
Bill: Yeah, well, he is free to come on and refute or confirm or anything at any given time. I will clear the calendar. But I have a feeling it's probably going to take a couple more months. I wrote them and I was like, “These are my listener numbers. I think it's big enough to come on now,” but they’ve got a rule. I just don't understand how the rule breaker can't break the rule. It's fundamentally upsetting to me. I hope one day, David if you're listening that you will come on. You know what? Brian Feroldi did me a real solid by giving me a shoutout, and I can't imagine what that guy's twitter feed is like, because my mentions have been nonstop since he mentioned me once. [laughs] It’s like, how do you even live man? He's got to have nonstop 20 notifications.
Austin: Brian, I'm friends with him, and he's a great person, really great investor. He'd be another-- You probably are planning on having him on the podcast already but--
Bill: Yeah, we talked briefly. I'd like to talk to him.
Austin: His process, the way he does things is so awesome as an investor, and he's shared the spreadsheets out in the way he does things. He'd be a great guest, and what he provides to people in terms of education and stuff, he's doing a great job out there on Twitter and with his newsletter, and he's an all-around awesome person, a great investor. So, that'd be a good conversation when you’ll think about--
Bill: Well, you look at the guys that came out of that school, like Morgan Housel wrote for the Fool, you all at 7investing, I do feel the people that stay at the Fool, that I've got to known do have a common educator’s ethos in them, I just needed to open up to the idea that maybe they were just doing a different thing.
Austin: Yeah. And again, it's almost the marketing and the services and the people at The Motley Fool on the investing side, two totally different companies is what it feels like. I love what they're doing as a company, my beef is just with the marketing, but people that I have some-- [crosstalk]
Bill: Yeah, no, I get it. I tell you what, man, I feel it with this podcast, I worry that some of these conversations are pretty advanced. I want to have the retail participant educated. I really do care about educating retail. I also really worry that-- you get a lot of that-- Anybody can sell a good-- We're all pretty smart here. So, if you get somebody that's hyped up enough on an idea, I just don't want retail to listen to this and be like, “Yeah, I’ve got to buy this,” and then I worry about the responsibility of it. I guess what I should say-- I shouldn't say it's entertainment purposes only, I should say, it's education purposes. But I digress.
Austin: Yeah, it's hard, and I think about that too with the things I share out on Twitter, because one of the things I’ve tried to do is just be very transparent with what I was doing, and I still try to do that. You can say, “Don't follow me, don't buy what I buy, just because I own it or whatever,” but people are going to do that, and then they could lose money, because of that. So, it's a hard thing to deal with. So, what's the alternative? To not talk about anything and not share anything out? But then, all the crooks and the scam artists are going to be the ones that share stuff and that people follow, it's ultimately going to be worse. I think, for me, what it comes down to is I just think like, “All right, I genuinely am trying to do good and trying to do educate people.” Some people aren't going to get that. It's not going to work exactly the way I want, but on the whole, it's like, “I'm trying to do a good thing, and so I'm going to keep doing what I'm doing.” I heard you talk about this too, is you've had negative feedback from people about this podcast or about-- I listen to the Value: After Hours. They felt like you weren't as prepared or whatever, and that really bothered you, and--
Bill: Well, the thing that bothered me about that-- I don't mean to cut you off, but what bothered me about that is there were comments about how-- and I saw them a couple weeks in a row that people were like, “Oh, he's got his new podcast, he thinks he's big time,” and it's like, “No, I owe everything to Toby.” I'm not trying to come on his platform and think that I'm bigger than him. Bands break up over nothing, and I just didn't want-- I saw it. It was a couple times, and I was just like all it takes is one toxic seed that starts to get watered, and it can ruin the entire thing. I just had to squash that. Then the other part of what I was saying is I was going through some family stuff, and I really did mess me up that weekend. So, I knew that I couldn't bring my A game to the show, and I was listening to myself the two weeks prior and I was angry when I spoke. I was having an argument with somebody that wasn't in the room, and I was like, “I just got to address this and move on.”
Austin: Yeah.
Bill: I don't mind the trolls, because the trolls are no one. It's just some angry person on the internet. I do mind the people that can actually ruin what I care about that, that I will protect.
Austin: Yeah, at the same time, you talked about this on the on the show with Toby and Jake, there's miserable people out there and no matter what, they're going to try to put their misery off on other people, especially other people that are doing things that they wish they could be doing or that they-- or whatever that they don't have. I don't know the person that made that comment to you, but as your podcast grows and as you put yourself out there more, you're going to experience that more and more and those comments don't matter at all. Because what matters is your relationship with Toby and Jake and they know who you are as a person, and if they felt like you were ever doing something or weren't living up to or you had changed, they would tell you, right?
Bill: Yeah.
Austin: You have that relationship with them. So, it's like-- I don’t know. You’ve just got to-- I don't want to say that stuff shouldn't bother you, because we're human, and it does. But I don't know, let it bother you for an afternoon or something but then--
Bill: Yeah. No, I dig, man.
Austin: [crosstalk] ignore them.
Bill: The other thing that, there was one person that was getting under my skin a little bit much, but I had complimented Preston Pysh for his bitcoin call. People still think he's wrong. He's been buying bitcoin since 2015. Even if you think it's tulips, he has said that more people will buy tulips. He wasn't even saying the whole time. Now, he's fully immersed in it, and he's got his thing. But I did an interview with him, you don't have to agree with people on their investment thesis, but once they've demonstrated that they've done the work, and if the scoreboard is talking this loudly, I'm just going to default to maybe I don't know. And God forbid, I should give him a compliment. The people that have-- They just come out of the woodwork, and it's like, “What's wrong with you?” Who cares?
Austin: Yeah, and it goes back to not being willing to change your view on things or your worldview when the information has changed. I'm not super smart on bitcoin at all. But to me, it's evolved from this thing with no use case and hardly any way to actually use it, and anywhere that accepts it to something that tons of people are using, people are accepting more and more, more companies, legitimate companies, are buying it. So, there's something there that doesn't mean that what the value should be if it's within 50% of the value that it should be, but the argument that it's a complete nothing, we're probably past that. It's something. There's something there.
Bill: Well, dude, why does any art piece trade for anything? I don’t know. It's because people believe in it. So, even if it's just an idea, even if it's just some digital idea of art-- you can argue that it's tenuous. If that's the case, you can argue that you don't like to invest that way, you can argue that it's specula-- I don't really care. I get the arguments, but the idea that it's nothing or that it's just all a farce, that's crazy to me, because there's so many asset classes that I think trade at absurd prices to me, but people are buying stuff. So, I don't need the answers. I'm allowed to not have an opinion. But you're also allowed to congratulate somebody that did well.
Austin: Yeah.
Bill: If somebody bought Monets when he was really young, and then somebody was like, “Oh, you just got lucky buying Monets.” All right, well, dude picked a pretty good piece of art, whatever.
One of the reasons that you and I talked past each other, in the beginning, is used to say stuff like Zoom’s a value stock, but you would also say like, “I don't invest with price targets.” I was never able to understand-- I think I understand what you're saying about Zoom's a value stock in that you were saying, it's trading at a discount to where I think it should be eventually, but then that implied to me that you would need to have a price target, so when you were like, “Well, I don't have price targets.” I was like, “What's this guy doing?” How do you think about the world in that way?
Austin: Yeah. Some of the stuff is-- it could be me just messing with you a little bit, trying to start crap, because again, where I come from, we give each other crap all the time in my military-- The job I had in military is very small community, everybody's super close, you live together in really small places, you go through really hard training together, and the only way that you get through that stuff is by having a sense of humor, and just giving each other crap about things that aren't funny, but that you make funny somehow and by harassing each other a little bit. But the difference is, that's in person, that's with people I know, and so it's obvious that I'm messing around or just give him a hard time whenever. That doesn't come through super well on Twitter all the time.
Bill: [laughs] Turns out social media can amplify some messages and missing nuance.
Austin: Yeah, right.
Bill: [laughs]
Austin: But there is truth to that in my opinion. Okay, when I was saying that Zoom was a value stock, it was like no, I know that it's not the value stock in a traditional sense, but this was back when, I don't know exactly when I said it, but it was probably around whatever somewhat-- [crosstalk]
Bill: It had to be Augusty?
Austin: Yeah, March--
Bill: I think it is August, because I was pitching Qurate right around then.
Austin: Yeah, and so I think that Zoom now, if we look at Zoom today, Zoom, I forgot on the screen. It's a $94 billion company, and so, do I think there's upside in Zoom, the way I felt that there was from March to August of last year? No, because the stock is a double or a triple since then or whatever. But I think if you look at what Zoom is doing and they’re essentially providing video communications, real-time communications. They've got Zoom phone now, they've got events on the platform and all this different stuff, and I think that the world has changed forever in some way, and so what I think is that we're going back to live events, obviously, we're going back to work in offices at least somewhat, but live events are always going to have a reason, or they're going to have the need to, or a way to offer remote viewing capabilities.
Corporations are going to have to have a hybrid work model to where people can work from home. They can work from different offices, they can work from smaller offices, they can do different things, and so the market for Zoom is not going away, and in my opinion, it's only going to grow from here. The challenge was Zoom is figuring out all right, they grew revenue 368% year over year in the last quarter.
Bill: Is that good? That used to be good.
Austin: Yeah.
Bill: I’m just making sure it's still good, because that's a lot of growth. [laughs]
Austin: So, next year is they're obviously not going to grow that fast. The challenge is, “All right, its trading at price to sale ratio of 36 with a market cap of $94 billion, and then revenue trail and 12-month revenue of $2.6 billion, what is the growth look like from here, and then what is the ultimate total addressable market that they can go after?” I think they're probably going to have, I don't know, 30% to 40% growth in the next year. I forget exactly what their guidance was, but I think they're being conservative with their guidance. But then ultimately, I think that they're going to be able to sustain 20% to 30% growth for maybe a decade, and where's that going to come from? That's going to come from the growth in their core services right now, but then the thing that I think a lot of people missed about some of these SaaS and software companies, is just how much they innovate and how different they look in three and five years than they look today. Examples of that are Square, if you look at Square today compared to five years ago, if you look at Shopify today compared to five years ago. These companies, it’s just a different breed of company, and I know that people said this same thing in 1999 or 2000, I was in fifth grade then, so obviously, I've been around the block, I was here for it. No, I'm kidding.
Bill: [laughs]
Austin: I wasn't investing then. I wasn't an investor. So, I can't say that I know what it was like investing in the dotcom era. But if you look back, what's clear to me is that, there weren't revenues really. The business model was truly an idea. It was like, “All right, here's the internet. It's going to change everything.” But there wasn't revenue to back it up, and things were valued on eyeballs and all the stuff that is irrelevant to making money, at least in the short term. What we're seeing with these companies now is they innovate super-fast, they've got real products and what Zoom did in 2020, the ability to scale and grow that much in terms of what services they were able to provide to people and how many people they were able to sign up, and how much they were able to grow revenue, that was impossible even just five years ago.
My thing in 2020 was we're dealing with different types of companies that have never existed before. One of the things that led me to the whole SaaS space and software space, I left the military, I left active duty in the military in 2017, and I was a business technology consultant for a year at a company called Slalom Consulting. They're huge partners with Amazon Web Services, Google Cloud Platform, Microsoft Azure, even Alteryx back then, and Tableau and Salesforce. What I saw was, their customers, the types of systems that they were using and the old legacy software and legacy databases and how everything was on prem and everybody truly wanted to move to the cloud, or at least hybrid, and so that was what the work that we were doing was, their databases were like 20 years old, and this is in 2017, 2018, and companies spend millions of dollars just to figure out how their old databases were built, and then how they can replace them with new databases. I just felt like the transition to the cloud was so early and then you see how fast those companies are growing. They have recurring revenue there, you don't have to build a new thing and have capital expenditures to get more sales, you just sell another subscription, so super high gross margins, that means every dollar of sales is worth more, and then the argument is they're not profitable. Well, you can see that if a company is on its way to being profitable, and it has the ability to be profitable. So, that's how I look at SaaS and tech.
Bill: How would you see that? I just want you to articulate that.
Austin: Just watching, and so we can use-- We're talking about Zoom, and so in-- I forget if they were-- they weren't profitable, I think when they came public, but then after a couple quarters, you could see how fast their sales were growing, how fast or how high their gross margins were, and then their losses were getting smaller and smaller every quarter, and then the other thing I looked at was these companies, are they able to spend less on marketing as a percentage of annual revenue?
Bill: You’re looking at marketing efficiency?
Austin: Yeah, every quarter or-- [crosstalk]
Bill: The change in marketing spend versus the change in revenues, something like that?
Austin: Right. Yeah. Because as these companies get more established, and they grow their customer base, they get more credibility, there's more word of mouth, their current customers upgrading and spending more, they don't have to spend as much on sales and marketing, and to me, that's a sign that the brand is getting more well known, it's getting more credible. So, what's the percentage of sales and marketing compared to annual revenues? And then, are they getting less unprofitable each quarter or each year? And then, you’ve got to look at seasonality too. If you see those things going in the right direction, and their customers are growing, and their customers are spending more every year, it's pretty easy to see the companies that are the real deal, and I think Zoom, Datadog, those companies of the world are the real deal compared to other--
I think there's a lot of SaaS companies that don't deserve valuations anywhere near what they have, they've just been brought up with the whole SaaS space. That's part of the whole ridiculousness of it, and why I was bearish on the entire space basically, because it just got out of hand. Anyways, those are the types of things I look at to see, is this company on track to be a profitable company, and then are they able to still continue growing if they're running close to profitability, or a little bit unprofitable. Amazon is the traditional case of that. Amazon was unprofitable forever. People said that they couldn't be profitable, and then the argument was like, “Well, they could if they wanted to,” and then eventually it worked out. But that's an extreme case. So, you can't anchor to Amazon.
Bill: Yeah, that would be a tough company to assume that every other company is going to turn into, for sure.
Austin: Exactly. Yeah.
Bill: How do you think through-- you said that you think that Zoom can grow at 20% for a decade or whatever, I can just hear somebody or myself say like, “Well, how can you have any confidence in that. That's 10 years.” How are you monitoring-- I know you're not trying to be precise, but I'm just trying to get in your head a little bit about when you tweak that thesis what you're watching to maybe say, “Okay, I no longer believe this,” is it coming from sell side reports? Just how are you building this up and getting your head into thinking about when to flip on something like that. Because I think that the risk when you got these multiples in that space as high as they are, I worry that I'm not going to be the first one out. If I'm not going to be the first one out, then you don't want to suffer real compression with that much air under the difference between where the business is and the multiple is.
Austin: So, you probably just saved me a lot of criticism from bringing it back up. The total addressable market for basically communication, Zoom has it-- I don't want to say it without actually looking at it, and we're in a podcast, but anyways, it’s a lot larger-- [crosstalk]
Bill: Yeah, look at what they say or whatever. Maybe put a discount on that or accept it as fact.
Austin: And then industry reports too.
Bill: Yeah.
Austin: There's some firms like Gartner and Forrester and these different types of firms that give, what they believe that these markets are going to be. The thing about total addressable markets is in a lot of cases, they're significantly underappreciated, and so over time, those expand because there's more use cases or different types of companies using it for different things or COVID happens, and now every company has to have a video communications platform, something like that happens. When I look at Zoom, and I say it could grow at 20% for a decade, in order to own a company like that, I have to see that the market is a massive market with a lot of potential for a company that's $100 billion company, which Zoom is, and see the potential for continued revenue growth to be there, and then it's like, the thing about investing is and this is probably going to make a lot of people mad, you don't have to own the company for 10 years or 5 years or for 3 years, and that's exactly what happened to me with Zoom as I owned it, and then it got to and I tweeted out, but I don't know, it got to $150 billion market cap or $180 billion market cap, and I was like, “This is crazy.”
Bill: [laughs]
Austin: And I ended up selling-- I forget what the share price was around $500, $550 something like that.
Bill: I remember when you did that and I was like respect.
Austin: Well, now, I own it again. Right now, with Zoom, I think-- same thing with Peloton, is I think that--
Bill: Oh, yeah, we’ve got to talk Peloton.
Austin: Well, the narrative is, “All right, COVID’s over. Everybody's getting vaccinated, and the things that matter are reopening plays, so I want to own travel companies, I want to own whatever, XXX.” When I hear people talking about that, that's when I get interested in Peloton and Zoom again, I'm like, “Okay, these things have sold off.” Zoom--
Bill: Where's Peloton trading right now?
Austin: I don't know. It's like $115, but Zoom has, what was it, 50% correction or 40%. It's trading--
Bill: Yeah, they all sold off hard. Yeah, $35 billion for Peloton. I was hitting my boy, Francisco, up when it was $30 billion because he and I have talked about that name, and I was like, “Ah, it's getting in the idea of-- I can start to see myself getting interested here.” I would like to see a two handle in front of it, and somewhere in the mid-twos is where I think that I would really get interested.
Austin: Yeah, Peloton is interesting, because their founder, John Foley, thinks that they can basically-- From here, I think it's 100x their membership-- Their members or I don't want to--
Bill: [crosstalk] makes me nervous, man.
Austin: He think they can get to 100 million members or something like that, and they're at, I don't know, 2 million or 3 million right now. Really the thing with Peloton and Zoom right now is, in terms of the total size of the companies right there, Zoom is sitting at about $100 billion market cap, and it's still trading at a pretty high price to sales ratio, and so the thing that I own Zoom, but I also have-- and this is where this is not advice. Don't follow me. Don't use options. If you're not familiar with options, you can really, really screw yourself, but I have covered calls on Zoom right now and Peloton, and the reason that I do is because I'm not sure if I believe in these companies long term. I think their total addressable markets are massive. I think they can continue growing at some rate for a long time. I'm going to continue to monitor them from quarter to quarter and year to year, and make sure that their growth is on track, they continue to innovate and release new products. But I don't know if they're overvalued or fairly valued or not right now, and so what I do know is that the option and the call premiums were pretty high. So, I collected about a 20% premium on the price of shares that I own and sold covered calls. What that means is that if it's above the strike price that I sold, the covered calls, my shares are going to get called away, if I still have that option open.
I did that because that protects me a little bit if the stock goes down, and if I'm wrong, and there's maybe the reopening play really does damage the business of Zoom and Peloton, and they don't have good quarters or something like that, that gives me protection if I'm wrong, but then it caps my upside to about 20% higher, if the companies continue going up. And where I'm at is 2020 was an anomaly where these companies 4x’ed, 5x’ed, 6x’ed whatever. I don't think that's the norm. If you can make 20% on an investment or 30% on an investment in a year, that's pretty dang good. So, I went out to was December or January of 2000-- December 2021, January 2022. If I can make 20%, 25% in six to nine months, I'm a happy investor in any year other than 2020.
Bill: Where'd you buy Peloton roughly, like valuation? It doesn't matter. I'm just asking for a ballpark. Low $30 billions?
Austin: Yeah, my cost basis is $113.
Bill: Okay, so right around here. So, down 20%, you're looking at a $28 billion company. Yeah, I can understand that bet, even though, I'd like it a little lower to bet it. I understand what you're thinking there. My first reaction when you said that you were short the call-- so for people that don't know what we're talking about, a covered call is when you own shares in the company, and then you sell a call that is at a higher strike price. So, it's covered because you already own the shares, as opposed to being naked, where you can get in a lot of trouble, if you're naked. I was almost going to say that I would be more inclined to buy the stock and then buy the put under it, but I like how you're seeing and instead, especially if you're bullish long-term, because you're not really that worried about the business really eroding necessarily. You’re just trying to maybe fill an air pocket.
Austin: Yeah, the thing that I don't know is what is the short-term reaction to COVID stocks going to be as we get to this reopening and more people are vaccinated? Even though the businesses are fine in Zoom and Peloton, I could see the stock selling off just because that's what the market does, and even if you're right on something, stocks go down, and stocks go up for reasons that sometimes don't make a whole lot of sense. I guess the way I'm looking at it is if my thesis is right and these companies continue to grow and continue to do well into next year, and the stock was down, and Peloton, for example, was down from $120 to $95, or whatever my strike price gets me down to, in January, I would probably want to buy more shares, because I'm still a fan of the company, the business is doing well. Oh, by the way, they've now grown revenue even more. So, the multiple has come down if the stock price is down, and their sales are up, that means the multiple’s down, I would be a buyer of both Peloton and Zoom, come January, if they are basically lower from here and their businesses are still doing well, according to my thesis. I'm not an options expert by any means, I saw an opportunity to collect about a 20% premium in companies that I am a happy owner of, and to me that just-- I know I'm not always right, I'm not going to be right. That just gives me a little protection to the downside allows me to make some money on my investment, and there's no taxes involved here because this is the social capital portfolio, and so it's not like it's my own personal portfolio where I'm paying taxes on every transaction.
Bill: Yeah. Consult your tax advisers and do your own due diligence.
Austin: Yeah.
Bill: That's the moral of that story. I like how you're thinking about that. Shout out to the guys at Chit Chat Money and Ryan Reeves. They caused me to rethink Peloton a little bit with their conversation, and that was one that I don't think I missed it. That's not fair, I do think I was a little bit too close minded to it. I do love my Peloton. I will tell you though, I don't use it nearly as much as I used to, but the part of that business that I like a lot more than I thought that I would like, is the potential for it to become a distributed trainer, because a lot of people laugh at the cost of the bike, and they say like, “Oh, this is just some service for rich people.” But if you've ever used a personal trainer-- I've been at gyms that cost multiple $100 a month. Now, it was very tailored, and it saved my back from sciatica when I had it. So, it was worth every penny. But what's the subscription? 35 bucks a month or so? So, if you are at $35 a month, and you're spending somewhere between six and eight hours of engagement, that's a really cheap workout. Now, YouTube is a reasonable alternative I guess, but there's something real about the community in that business. So, I think that's probably the part that I probably could have pushed myself to think about better. Maybe still should.
Austin: Yeah. The tough thing about Peloton is in some ways it's not a SaaS company. It should never be valued like a SaaS company, because they have this hardware component where they have to produce the bikes and the treads and these different things that they sell in order to continue selling, but they do have a subscription component to the business which is the monthly subscription that you get. So, last year, I was a fan of Peloton, because I thought it was treating it like a price to sales ratio of three years out something crazy. It was pretty clear they got a double or have 100% or higher revenue growth which then if you multiply that out, that makes it a pretty cheap company. Now, the thing against Peloton is, well, Apple’s coming into the space, we’re reopening. But they made the acquisition of Precor, which Precor is I think the number one distributor to hotel chains in different places. What that means is that they're going to get-- maybe it's a cheaper version of Peloton. I don't know what their ultimate goal is, but they're going to have inroads into relationships with workplaces, college campuses, hotels that's going to introduce people to Peloton and then, oh, by the way, it's also going to make their membership more valuable, because if you're traveling for business, or you're at school or whatever, you can get your Peloton workouts in and use your account when you travel to hotels and stuff like that.
And then, I think they're going to come out with some new devices too, or some new hardware. I think they're going to have a rower. I think they're going to do some other stuff. The demand in the space is clearly there. If Apple is moving into connected fitness, then it's a pretty big deal, and people look at that as a threat, but I think it's more of a validation of the potential size of that market, and then yeah, what makes Peloton special is their content-- their trainers have millions of followers on Instagram, they've got the community aspect, and we've talked about this a whole lot but one of the things I think is going to come out of COVID is, I think we're going to see this over the next year, year and a half is a lot of mental health challenges and a lot of health challenges where people-- I'm not a psychologist, but--
Bill: Dude, look at vice consumption. Vice consumption spiked during COVID.
Austin: Yeah.
Bill: People are dealing with some stress.
Austin: Yes, and so I think you see in the middle of things-- and this again goes back to my experience in the military, just dealing with people going through hard things, in the middle of things people deal with them through drinking or through bad habits that they use to cope, but then the true-- and this is just what I've experienced as a person, the true mental component the long-term mental health issues start to surface six months later. PTSD from people in the military, I think people are going to have PTSD from COVID and from what happened being locked up indoors. It all just different kinds of stuff. I think people are going to be searching for community. People are going to be-- Mental health is going to hopefully become more of a focus and I think that there's ways that Peloton can help people with community. They can help people stay healthy and then who knows, maybe they have some type of mental health component or whatever. So, I think that the business is an interesting one and I think it has more staying power than some people are giving it credit for, which is why I own the stock.
Bill: It reminds me of a combination of Roku and Netflix, and that it's got this hardware component with a subscription, but since it's not advertising, I don't really think it's akin to Roku. I think it's closer to Netflix with the content component to it. I guess with the Precor stuff, I would be nervous if they mixed brands. If they put Precor in hotels and then they said-- if they kept it a pre-core machine with a workout by Peloton or something, I don't think they should mess with the core product, because there's something really powerful about that community and saying like, I use a Peloton, that I think that I would not mess with that formula, but they may not be able to get as big. I stayed at hotels to use a Peloton before. So, I do understand the brand and I do understand the affinity for it, and they have great instructors. The other thing that I've struggled with is, “Am I a Peloton subscriber, or am I an Alex Toussaint subscriber?” I think I'm a Peloton guy, but I love to get yelled at by Alex. I like how he does his classes and stuff. That's one of the things that is lower on the tiers of things that I haven't gotten to, but I will admit when that stock was around $100 a share, even I was like, “Ooh, this is getting interesting.”
Austin: Yeah, the thing about it that is a potential threat is like, who has the customer retention power, I guess you can say, but the thing is-- because of the scale of that business, and that those instructors can reach potentially millions of people at once on Peloton’s platform, you don't need that many instructors to provide all the content that they need, which means that they can make that one of the most lucrative jobs in the entire fitness industry for any of their instructors without it costing the company that much money. I forget exactly how many instructors they have. But even if you're paying a million dollars a year each--
Bill: It's like nothing.
Austin: Yeah, that's nothing in terms of bottom line for business. What are they going to do-- [crosstalk]
Bill: You could pay him $10 million a year and I mean not really but what do they have, 10 instructors or something like that?
Austin: I don't know. It's, a double-digit number. But still, it's nothing.
Bill: They'll get more, but-- You might get a mindfulness. They got meditation in the app. So, maybe you get a specific meditation instructor or something. How many of those people do they need, maybe three or four? Huh.
Austin: Yeah. The other thing, I worked at a company called Lambda School, which is a startup that teaches software development online. We had a $100 fitness stipend each month. It was a remote company. A lot of people used that fitness stipend to buy a Peloton, and that covers basically-- it’s a little higher now that at least the cost of the new bikes, but that covered the cost of the bike plus the fitness subscription. I think one of the things we're going to see is more companies to be competitive and keep talent, they're going to have to offer things like health stipends, and those different types of things, which I think lends itself to services like Peloton, and so then the thing is just like, “Can they keep the best service at the right price to attract those dollars versus the other things that come out?” And that's what investors have to figure out for themselves and decide. The work environment has changed, and it's going to have all kinds of ramifications for different types of companies.
Bill: I agree with that. I use it a lot less. I do not use it like I used to, and that would make me nervous, because I think the last time that I looked at their cohorts, they’re churn five months in was a little bit higher than I would have liked to see. But I'm still a sub, and I still do think that I derive a fair amount of value out of that app, and actually, one of the things I was talking to my dad about was, he uses the Calm app. It's really, really helped him, and he's trying to push me to set aside some time for thinking each day and certainly with my Twitter addiction, it's probably a good idea to unplug, and I am probably going to lean on Peloton a little bit to begin that because I'm already paying for it. So, why would I add yet another subscription to my life that has way too many already? I barely even know what I subscribe to now. I need to make a spreadsheet. It’s crazy.
Austin: Yeah, same. I've been trying to focus on the same thing, being more mindful, and I've never been a meditation person. My relaxation or whatever has been through fitness and three different things. One of things I have picked up, and this is Chris Seifel actually, I talked to him about, He's out there on Twitter, is reading about stoicism. So, Ryan Holiday, I don't know if you've heard him or not, but he's an author. He's got a cool podcast, The Daily Stoic, he's written a book. Couple of books.
Bill: Oh, I have read The Daily Stoic a little bit.
Austin: Yeah, he wrote a book. Released it recently, Stillness Is the Key. But anyways, just on the note of like, we talked about mental health a little bit, and you and I have both openly shared some mental health stuff. One of the things that helped me is learning about stoicism, and I thought it was corny at first, but there's a lot of potential truth to it. It's actually helped me put things in perspective a little bit. So, yeah, check Ryan Holiday out, and his book, Stillness Is the Key, is really interesting. It goes through how different people can apply stoic principles to their lives, and then some of the challenges with people that we see as idols and as great. The examples in there, like Tiger Woods and other different people that are celebrities that have just had these total breakdowns, it's like unpacking that a little bit and seeing where it comes from.
Bill: This is going to sound really arrogant, and I totally understand it but I am dealing with things as this podcast gets bigger that I didn't think that I'd have to deal with. I am not trusting inbounds like I used to. I'm worried that people are trying to use the platform a little bit, and it's stuff, and I'm still like a gnat in the world. Nobody knows what this is, or maybe nobody ever will right, outside of finance. At the end of the day, I have thought about how hard it would be as you get bigger and bigger and bigger, I think that people ask like, “Are you worried about commitment bias and stuff being the downside of being public?” I don't care at all about switching my mind tomorrow. Anything I say on this podcast or a stock that I say that I own, I could change my mind in a second. What I do care about is becoming paranoid. That's what I really have to guard against, and it's going to take work. I was talking to my dad about talking to a therapist about it. I think it's going to be something that I'm going to have to cope with. We'll see, I'm sure I'll be fine, but it's a new thing that has been introduced that I didn't think-- if you rewound the clock, 18 months, I'd be like, “Why would I ever worry about that?” but here I am.
Austin: Yeah, and it's crazy too. That's at your level, and I've thought about some of the same stuff and I don't have a podcast this-- [crosstalk]
Bill: I had nothing, dude. I got 20,000 followers. Some of these people have hundreds of thousands of followers.
Austin: Yeah. That’s what I was going to say is. At times in my life, I've been like, “Oh, these celebrities that have everything or whatever, and they're rich and blah, blah, blah, what excuse do they have for being depressed or having mental health issues?” or whatever. I was young, immature, stupid me, but then you realize, we're all human, and it's the nature of being human to have these challenges, and these issues. No matter, money or popularity doesn't make that stuff any better, and sometimes it makes it worse, and so, you're feeling the pressure from this, that just puts into perspective what somebody like Tiger Woods, or name any celebrity feels. Again, I'm not saying that they have it so hard. I'm just trying to be more aware of different things. Everybody's dealing with something.
Bill: I dig, man. Your boss deals with it, or I don't know if he's your boss, but your seeder, and I go at him sometimes. Some of the stuff he does really pisses me off, and I'm not asking you to comment on it, I'm just going to talk to you for a minute. The other side of it, if I wanted to be charitable, is I would say, a little bit about what we talked about marketing. If you think you're going towards a goal, and you think you need people to follow you into that goal, and you think that that's your best method of marketing, then I can understand the other side of the argument. Maybe one day, if he and I ever talk, I'm probably going to ask him some hard questions, and he probably has answers, and maybe we'll get to resolve that. But who knows? That's a long time away.
Austin: Yeah.
Bill: It's really weird. It's weird to start to feel pressure that I didn't think I'd have to feel, and I do know that I am talented at this, I do know that I have a moderate amount of talent in investments. I continue to struggle when I see some of these hedge fund pros talking to each other about, how do you know if a stock has downside in the short term? The way I invest, I kind of don't to be honest, and I almost don't even care. Then part of me is like, “Well, how can you possibly even say those words?” The answer is because I'm trying to concentrate on the stuff that I think I can control and the stuff that I think I can win it, and I can't outmodel point 72. It'll never happen. So, I'm just not going to play that game.
Austin: Yeah, and that goes back to the whole price target discussion for me. I don't know if I did a good job answering this question or not, but this is from the way I learned about investing through the rule-breaker mentality which David Gardner's laid that out. He's got the traits of a rule-breaker stock, he's got the traits of a rule-breaker investor, he's got a checklist. I use all that stuff. At the core of it is finding great companies that he thinks can be bigger in the future than they are now. What I've never heard David Gardner talk about was price targets, or even PE ratios, or price-to-sales ratios. I'm sure he looks at that stuff, and he, at some point, it's got to be a part of everybody's process, but to me the notion that I have this specific dollar value on a stock, or a specific market cap, or even projections for specific sales or specific customer growth, or a spreadsheet that everything has to be perfect, I'm never going to be able to do that, I'm never going to be good at that stuff. I just I know that as a person, and what I think I'm okay at is finding these companies that have created these awesome software platforms that have the potential to grow and be a lot bigger in the future. To me, what I know that means is that I am going to have more volatility in my portfolio. I'm going to have bigger drawdowns, because of the types of companies that I own. So, you just have to know who you are, what type of investor you are. If it works, orient and optimize towards that, and then not even really-- I don't know that you should compare yourself to hedge funds, because it's a whole different thing. I'm going through the same. We haven't even talked about it, but then there's people that probably don't know what I'm doing, but this job at Social Capital, where I've been given a portfolio, you doubt yourself and you wonder, like, “Do I belong here? Do I even deserve this? There's people that have so much more experienced than me,” all that stuff, and it's really easy to talk yourself down and make yourself feel like you don't belong. I don't know, we’re where we are for a reason.
Bill: You know what I struggle with a little bit now is when I exited the airlines, and the banks was by March 12th or something like that last year. I went into Microsoft and Visa. The reason that I did that is I said, I want to own the strongest businesses in the world because I don't want to reduce beta exposure because I don't know how this all turns out. I just don't know. I already was carrying a decent amount of cash into that whole thing. If you look at the charts, it's almost when they started to rip. And then, I traded out of them to go into Qurate in a big way, because I needed funds, and part of me is like, “Am I just some lucky factor investor? Did I just pick a bunch of factors correctly, and do I even know what I'm doing?” And then, the other part’s like, “Shut up, you know, you played that well,” but it's wild that I'll still struggle with that because it's almost some of-- The Microsoft and Visa call was almost just like a macro call and that's supposed to be dirty in how I've learned, but it was right. [laughs] I don't know, I was given a situation. I managed it really well. I don't know what else I want from myself, and yet, I still don't feel that was enough. It's crazy.
Austin: Yeah, and I don't know, you're probably always going to do that to yourself, because that's-- [crosstalk]
Bill: I'll tell you what though the day I think I'm the shit, I'm shutting down, and I'm going to give my money to somebody else.
Austin: Exactly. That's the thing is that, I think that attitude makes it hard to deal with, because you're constantly second guessing, or juggling things, or whatever, and I deal with the same thing. But that attitude-- and this what I was saying earlier, where weaknesses are strengths and strengths can be weaknesses, is that attitude is also what keeps you hungry, and what keeps you doing well, and double checking things, it's probably a good thing, and it just makes your life a little harder, because you're hard on yourself.
Bill: Can I out you in a really public way, is that okay?
Austin: Sure.
Bill: You don't know what I'm about to say?
Austin: I have no idea.
Bill: You want to tell people how you came over to the dark side and joined Malone?
Austin: I did for-- [crosstalk]
Bill: It’s okay. If you traded out of it, but I liked that you joined him at some point.
Austin: I did for a short period of time. Yeah, I don’t know right now.
Bill: Dude, I'm telling you, man, I talked to some people that watch you, and I'll talk about me, and I'll just tell you a couple things that they said. How I have seen you manage over the past, I would say, eight months has given me a lot more respect for you. A lot. You made really public pivots in stuff that you were pretty married to, and then you came to the dark side and joined the man almost-- I'm not trying to oversell what you did, but you sidestep the big drawdown and now you're pivoting again, and I respect it, man.
Austin: Yeah, well, thank you. So, the whole Liberty thing and Malone, this goes back to style of investor, the type of investor that I've been and that I think I'm good at has been identifying software companies with great management teams, mostly founder led, great products that are going to grow through demand and that are going to help other businesses build on top of their platforms, essentially. That's Twilio, that's Shopify, that's even The Trade Desk, all these companies I've owned. What I'm not good at is looking at something that's like a net asset value play, or that there's different types of components to the investment like that, because I just don't understand it as well. I talked to you about it, and you shared your thoughts and helped me understand some of the potential pros, some of the potential cons and so, I don't know when it was, a month ago, three weeks ago, a lot of the--
What I felt when we first opened these portfolios with Social Capital, which was March 1st was the SaaS and software and tech were just extremely overvalued. I didn't want to own them, because even though I loved the companies, I just didn't see outperformance over the next year or two years, because of just where they were at. So, I could have been in just cash, which would turn out to be the best thing because of what happened in the market, but I didn't want to just be in cash, because I believe in being invested, and so I looked to other things. I looked to things that were you could say much more value plays. I owned O'Reilly--
Bill: You could have come to QVC. You know that, right? [laughs]
Austin: I owned Liberty Broadband, I owned Liberty TripAdvisor, I owned O'Reilly Auto. I own Facebook now, which has trailed the rest of the crazy hot tech sector. It was just because those valuations made a heck of a lot more sense to me, and those were fine. I did fine in those, but what I realized is I couldn't get comfortable enough owning them, because I just didn't understand the ins and outs of those businesses and what made them tick and what was going to make-- I wouldn’t know how long I should hold Liberty Broadband and if I needed to attract Charter, and they're different, just not good at all that stuff. So, this portfolio that I'm managing has been really insightful and it's like you doubt yourself every second, especially over the last month. So, I've now oriented back towards companies I'm more comfortable with. mean, the SaaS valuations have come down by 30% to 40% in some cases, and so I'm a little bit more comfortable owning them with covered calls to give me a little bit protection, but I've also got 32% cash.
So, yeah, I don't know, I think it's a mistake to price anchor or to marry yourself to ideas. I brought on myself because what I was, as an investor was owning companies or just holding them for a really long time, and that's fine when you're building a portfolio of your own money, and you can have 30 to 70 companies or whatever, which is kind of the Motley Fool way. But now, it's like I'm okay with, if your thesis plays out, or you're ready to move to another idea, then you need capital from somewhere if you don't have capital coming in. So, you have to buy and sell stuff. People can crucify me and say, “I’m a traitor and all this stuff.” I don't really care if people say that, because it's not their money. It's mine, it's my family's money, and I don't know, why am I investing?
Bill: Welcome to my world, man.
Austin: Yeah, I'm investing for my family and for our future and meant to hopefully have enough money to make a good impact on the world. So, if I sell something, you're mad about it, then that's something wrong with you, not wrong with me.
Bill: Yeah.
Austin: Get over it.
Bill: Yeah. I agree with that. I'll tell you what, follow-on real quick to any of the telecom and cable people out there. If you can help me figure out when 5G is the real threat, when everything comes together, please, please let me know, because I think I'm not going to be the first. That's the thing that keeps me up at night about cable. I get a lot of comfort in Charter strategy. I've actually exited Comcast even though, I was thinking last night, that's maybe not the right thing, but I don't like what's going on with some of those assets, and I needed to get out to get rational. I like that Charter strategy involves scale benefit shared, but I understand I'm saying that about a cable company and people hate cable companies. I don't know, I do worry about if 5G, if the tech ever comes together, and there's enough things that click, do you end up with a local economy of scale competing against national scale, and how dense does it have to be in order to compete effectively? That stuff is at least stuff that I think about. I don't like to sit up at night thinking about it, but I try to pay attention to that. So, why do you like Trip? My wife loves TripAdvisor reviews.
Austin: When I looked at it, it looked like it was-- So, obviously the revenue took a hit in 2020, and that's the thing, 2020 made it a lot harder to think about companies going forward compared to comps obviously from last year, but then even, what are they going to look compared to 2019, 2018. But to me, it looked like TripAdvisor, the valuation was a little higher, but that was, I thought, because of how much of a hit they took to their growth, like revenue growth and sales growth. So, to me, it looked like when that started to normalize, it would actually bring the valuation down, which meant that the shares, if it does normalize, were trading at a pretty rational valuation.
But the reason I sold-- again, Liberty TripAdvisor just because I am not super smart on all right, how much of the company do they own? How much upside does that mean that they have? The shares go up this much, and it seemed like the two were disconnected, like TripAdvisor would go up, and then Liberty would go down, and so I just realized, I wasn't comfortable with it, and you don't have to own everything, and I, as much as I wanted to be oriented more towards value, you still have to own things that you know, and things that you can hold and that you can be comfortable with. Eventually, these reopening plays, and these travel companies, they're going to be overvalued because it's still going to take a long time for their revenue to come back and their sales to come back to where it was. And it feels like a lot of them, and maybe this is like more of the cruise lines than anything else.
Bill: Yeah, the airlines too I think are certainly not priced-- I think there's some optimism priced in.
Austin: Yeah, and that's why ultimately, I was like, “Ah, I'm just not comfortable here,” because it feels like a lot of that stuff had been priced back in already, and so, this is an interesting time to be an investor. It's fun because I don't like investing when everything just goes up. It doesn't feel right, and it feels like it should take some type of research and due diligence and skill potentially to do well as an investor. When everything just goes straight up, it's like that's not right.
Bill: Yeah.
Austin: Especially terrible companies that--
Bill: Yeah. For a little while, the junk got a bid harder than anything. I reached out to a couple people that I respect in a couple different places, and everyone was telling me the same thing. They were like the junky names in my space are the things that are really ripping. So, I don't know, man, it's not that easy. Running a fixed book, it's harder than-- Well, I shouldn't say it's harder, but I think running the strategy of always having something come in and having 60 or 70 names, it makes a lot of sense to me for the individual investor. I think that one of the things that I get nervous when I hear people follow a Buffett-style strategy is I don't think that they understand how much work is needed before you get concentrated on something. Maybe I'm discounting it. Maybe it's me that didn't understand it, but I don't know, man, you start taking big swings, it can get really nerve wracking. And that's almost as hard to deal with as whether or not the thesis is correct.
Austin: Yeah, and then it’s, I don't know, where do you land, and it's different for everybody. This isn't advice for anybody, but that's why there's a real case to own either equal weight everything or whatever because you could be wrong, or you could be right, and then you let the market take care of it, and then you let the performance of the company take care of itself over time versus because you'll see some of people's best ideas are their worst performers and their least competent ideas are their best perform. That's the beautiful thing about investing. Those are so many different ways to do it, and I don't know what the right answer is.
Bill: I have yet to bet big and lose on something, and I'm nervous that it's because my sample size isn't big enough. I'm like, “Okay, well, is this actually the strategy that I should do going forward, or am I taking more risk?” But I don't know why you didn't listen to me, but QVC was too damn cheap. I do know why you didn't listen, but that was the biggest bet that I've ever made. That day that it traded down after the spin, that was not fun at all, but I fortunately bought a little bit more, because I was like, “Well, at this point, I'm either going down with the ship or not.” Did you hear how I sized that?
Austin: No.
Bill: Oh, dude, I took my wife. While we're sitting on the couch, actually the first time I asked her again at lunch, but we were sitting on the couch, and I said to her, “How much money can I lose on this bet before you'll resent me for the rest of our lives?” People ask like, “How do you think about position sizing?” Well, that's what I did. I figured out how much life risk I was willing to incur, and she gave me the answer, and then I just bet a little bit more, because I wasn't going to write it down to zero. So, I did a value at risk type theory. But I'm glad that I can smile about it now, because had I had-- If it had gone down 30% before it rallied, I guess on one hand, I would have just been like, well, they're just going to buy the whole company back, and it doesn't matter. But the other side of it's like you got to actually stay in it to realize the outcome. I think you’ve got a fighting shot at the bat for a couple reasons. I'm very nervous about where she’s shopping right now. I'm nervous that she's been stuck inside, and she's tired of looking at her favorite QVC family, and she's going to go to retail, and with that much leverage in the cap structure, the shares are going to puke, and hopefully Mr. Maffei has enough cash on hand to take advantage of that scenario, should it happen.
I also think the thing that sucks about that idea is as it goes up, the buybacks don't go as far. My ideal scenario would be for that thing to get cut in half now, and then to have this cash on the balance sheet. I just feel like I'm going to make so much money someday, but unfortunately, that's not how life works. I wanted it to trade flat for 6 to 8 months or something like that. That would have been the ideal scenario. But that, that's one that was wild. So, I was sitting around-- and it's a business that I've followed for years. I was just sitting there, and I opened up their 10Q because I was like, “I should just look at this.” I saw the free cash flow, and I was like, “What is going on?” I don't know why I didn't connect it. I would have been nice to do in March when it was like $2 a share or something stupid like that. I was just like, “Oh, my God, this thing is just printing cash. Of course, she's stuck inside and getting addicted to these products.” So, we'll see how it all turns out, but to your point on handicapping, they've said over and over again that the cohort is twice as big and the behavior is exactly the same, but we're all stuck inside. So, how do you handicap what's real, what's not real? It's not easy.
Austin: Yeah. So, have you trimmed that position at all, or--
Bill: Yeah, that thing was huge at one point. I'm not holding that much in QVC. I can live with that.
Austin: Yeah.
Bill: I got my basis out and I got a nice-- I improved my life a little bit. Now, we'll see the rest, but I had it at 2%, and I was sitting with my boys, Francisco and Alex, we were talking on the phone, and I laid the thesis out for Francisco and he had worked through a lot of it with me, and he was just like, “What are you doing?” I was like, “What do you mean what am I doing?” He's like, “You have this thing, either cold or dead wrong. But regardless, if you're right, you're going to make 1% or 2%? You want to put that much work into something and have it this cold and make 2%?” He's like, “Just put it into charter, and you'll make more.” So, then I got on the phone with Mike Mitchell, and that guy's out of his mind in a good way. I'm not talking shit about Mike, but at one point, he had 44% allocated to that thing. It was hard to handicap-- You know what it took a lot of, was confidence in myself. To be like, “All right, I've done the work that I can actually make this bet.” That was the hardest part of getting over it, and then the other part was like, “Okay, at what point are you going to get too aggressive on this?” and just managing those two emotions, and that was the biggest learning experience when that whole thing-- and just be patient watch.
Austin: That goes back to my reason for ultimately getting out of the Liberty family of holdings was just, I hadn't studied them long enough. I wasn't confident enough for them to be larger positions, and so even if it is a winning investment, it wouldn't have mattered enough, because of the size of the position I was comfortable having it at to really mean anything. So, then it's like, “All right, is a better use of my cash to be either stay on the sidelines, and then wait for what I think it's a better deal and companies I'm more comfortable with or something like that? Because then I can bet bigger and better.” So, it's a really interesting struggle or the thing to think about is, how much conviction do you have to have in a company to buy it, because you have to be confident enough in the thesis that, A, the stock is going to outperform, but then you can also have a large enough position for it to matter, and I guess that all comes down to investor style and stuff like that.
Bill: Yeah, and I think-- Is it true, that the Fool maybe will spray 60 bets and as one works that's the one that you focus on adding to? Is that the mentality that you learn from or not really?
Austin: Kind of a add to your winner’s type mentality that David Gardner has. So, I was never an analyst on any of their services, but one of the things that you see from them is, they do tend to go back and re-recommend the stocks that have won or been winners, which is contrary to buy low, sell high and all that stuff. But yeah, they do re-recommend their winners quite often, or at least they have throughout the history of their services.
Bill: That makes sense. How many positions are you running now in your strategy?
Austin: I had 16--
Bill: Unless you can't disclose. Don’t worry about that.
Austin: No, I could share that. I own 15 companies right now. Facebook is the largest position size, Bandwidth which is like, they do a similar thing that Twilio does, it's just a smaller company overall, and then they're much more reasonably valued in my opinion. I did own Nori Medical, they're a medical device company, did pretty well, and I just actually sold-- So, the rest of my positions are basically, Farfetch--
Bill: Ah, you like Farfetch?
Austin: Yeah.
Bill: How'd you find that?
Austin: Initially, I think I found it like someone out on Twitter had talked about it, and I wrote it off because I wasn't comfortable in the retail space, their gross, their margins weren't as good as software companies, but again, when software got to where I thought was super overvalued, I got a lot more interested in other companies and so Farfetch, you know what they're doing that interests me is, they're building what I think is a potentially the future of luxury retail online. So, they're making it possible for brands that are in store to also have a digital footprint. They're allowing companies to actually build new retail brands using their platform, and then they're doing a lot of back-office-type stuff to just really enable commerce. The thing about fashion that has always kept me away is pricing challenges. So, unless it's a luxury brand, it really didn't seem like there was pricing power and it was just crazy competitive and stuff like that. So, I really like the fact that they're oriented towards luxury.
Then what has me excited about is they've inked some partnerships in China with Alibaba and Tmall, and so that expands their customer base a lot if it works out, and then they're also going to get into cosmetics which is a huge market. Then when you look at valuation, it's trading at a price to sales multiple of 10 today, and they're going to grow between 30% and 40% for-- This management has said they think they can sustain that for the foreseeable future, and so when you look at what that means for the sales--
Bill: Yeah, five years out, it's not that demanding.
Austin: Right. The valuation is pretty reasonable when you consider gross margins and stuff like that.
Bill: I have a family member that hit me up. I might be able to introduce you to somebody that used it. She was very positive on their experience from-- she set up for her company, a store on Farfetch, and she liked it a lot. She also runs a Shopify store. It was cool to hear her talk about both those. She was kind to both.
Austin: Yeah. An interesting company, and this is a medical device company. So, it's outside of my realm of competence, but is Abiomed, they do the Impella heart pump, which is basically it's an alternative to using balloons, and I'm not a doctor, there's a lot I don't know. But the data and what it seems to be is that the outcomes are better with the Impella device, but the thing I like about it is it's pretty reasonably valued when you look at it compared to historical valuations, and when we think about reopening plays, I think the obvious ones are the travel plays and stuff like that, and some of that stuff is bit up by now in my opinion. What I think are somewhat the secret reopening plays are these medical companies who were hurt by COVID, because hospitals were shut down and people weren't getting seen for things. But then, that demand’s not going away. So, those procedures are going to come back, their sales reps are going to be able to go out and continue to sell and grow, they've got a real strong balance sheet. Tt's an interesting company people might want to look at and consider. They’re established, they've been around for a while, but it's pretty interesting company.
Bill: I've heard people pitch ClearPoint Neuro. I think that's what it is, CLPT, but I talked to somebody that is in it, not in it. I mean, he does on the stock, but shoutout to Guillermo, if you listen. How you doing, man? He's helping kids with brain issues, and so he's got a little bit of a sense of what the applications could be-- I shouldn't say a little. He knows what he's talking about. But it's just hard because I don't know anything about that industry. The one thing that he did say that I can get my head around is-- when you are in that business, once you start buying medical equipment, it's very, very rare for like an ER or hospital to go out and start buying from another manufacturer.
Austin: Yeah.
Bill: So, if you can be early in your technology, and early on the adoption curve, once the doctors accept you, then it continues. I've seen it a little bit with Henry Schein in dentistry, but there's a slightly different strategy. They got their tools into dental schools, and then once people learn on your tools, they just don't try anything else.
Austin: Yep.
Bill: So, I like the idea as it's pitched, but I just don't-- When you talk about a circle of competence, I don't have any confidence that I'd be the guy that knows. To your point on how much can I bet on it, I'm not going to make that a big enough position to be life changing to me. So, then it's like, “Okay, well, do I want to do the work to talk to enough experts to get my head around it?” The answer might be yes. I'm not sure that it's no, but right now, I'm working on a podcast. So. everything's a trade off in time.
Austin: Yeah, I'm not trying to convince you here, agree on not my space necessarily medical device companies, but the interesting thing about Abiomed is because of the FDA approval process, it would take a competing product about five years to go through the approval process and then get approved and start to get into the system. Their competition really is the old way of doing things, which is a balloon pump that is used to then allow blood and oxygen to flow properly through the body. So, their challenge has been and they've been able to do this. It's why the company was successful in its past, was just getting started and getting in and now they've built out their Salesforce, and then there's all the relationships that they have in hospitals and these different places that do these procedures.
What I like about is I feel there's a little bit of a moat there, because they've got that Salesforce established. It would be really hard to build that Salesforce for another company, and for a competing product, which-- a competing product would be a pump that does something similar to what they're product does would take five years from the time it started the approval process to being approved or cleared. So, I'm not an expert, but it feels like that provides a little bit of a moat or a little bit of security and the fact that they're not going to get replaced by a new thing tomorrow. So, yeah, that's one medical device company I'm comfortable owning, because of how established their brand is, they've already been being used for years, and it's really hard to enter that space for someone else.
Bill: Well, regulatory arbitrage is something that near and dear to my heart. I like that. That's a reasonably good investment thesis that I can get my head around. If anybody hears anything that Austin or I said that is incorrect, please hit us up, because knowing when you're wrong is important in this game. That's the cool thing. I find it so cool that people are like, “Hey, man. Thanks for doing what you're doing. I work in this field. If you want to talk, let me know.” It's a real benefit. It's funny for a while I was really, really hung up on how am I going to monetize the pod and whatever. Then I just realized, that was just stupid. But do good work. That's how, make your guests happy, make you, listeners happy. The money will come, don't worry about it. But the idea flow and the network has been just incredible. That's what I should focus on. Do you want to talk about anything else? Because I'll go all day, man. I don't know what your day looks like. I mean, do you have any strict employer that I have to crack the whip for.
Austin: Yeah, neither do I, which is pretty awesome. I can't believe the opportunity I have in the job that I have. There's we have meetings and stuff like that, but investing for me had always been-- While I was in the military, it was always something I did, outside of work, or as a compliment to the earnings I had to try to set my family up to have options for retirement and things like that. So, I had to do it in my spare time. Then, I always had jobs where it was like, you had to be there, you had things you had to do, you have meetings, you had all this stuff, and to transition to like, where investing is my job, it's terrifying a little bit, it's humbling, but it's also really awesome. It's like the job is to spend time researching and learning about the world and talking to people and studying companies, and then figuring out what your worldview is, what your portfolio is. It's liberating, but it's easy to waste time too.
Bill: Yes, I do know. [laughs]
Austin: Yeah. I think we've talked a lot about specific stocks and stuff like that. I think some of the things I've enjoyed most about your podcast or when you guys talk about things that are completely different than stocks you own or whatever, so happy to talk about any of that, like life stuff. One of the things I've been thinking about lately is, how would I grade myself on 2020? So, then it's like, all right, how do you look at that question? If you look at it from a professional standpoint or an investing standpoint, for me, that's pretty good. I did pretty well as an investor, and then professionally, I lost my job in April of 2020, then it's like I'm so thankful for Twitter and for everything I was doing, because then I had the 7investing opportunity, and I did some consulting based on previous work experience for people that I met through Twitter, and then ultimately, it led to me getting the job at Social Capital.
But then, if you peel that back, and if I take away investing, and I take away the professional side of it, honestly, I would give myself a pretty bad grade on 2020 as a person, as a father, as a husband. I think some of that's probably being hard on myself, but it's so easy to you hide from-- for me, not you, me. It's so easy to hide from responsibilities that are hard or challenging, and you hide behind work or your profession or whatever, and then I justify it by like, “Oh, I need to focus on my job or investing or whatever, because I'm trying to do what's good for our family and our finances,” and stuff like that. But then really, it's like, “Okay, maybe I was just justifying that and then hiding from other responsibilities,” and hiding from being present with my family and being there for my wife and all this stuff. So, if you want to talk about it, we'd love to hear how you would grade yourself on 2020. I'm happy to go more into why I think I did a crappy job and what I’m trying to change.
Bill: Yeah. No, for sure. No, we can do this. I'm not going to ask you to beat yourself up, but we can do this for sure. I would say that how I would rate 2020 was-- the reason that I started investing on my own was so that I would do something that-- or follow a strategy that I could stick with when I was stressed. From a work perspective, I'm pretty proud of what I did in in 2020. Personally, I would say it's the most proud that I've ever been, and the really, really conflicting part of that is that it involved a really public suicide. I was sitting with his dad, it was either on his dad's anniversary or on Alex's birthday, and his dad was-- we had to have a conversation that we had to have, and he was like, “I'm just curious. What happened to your Twitter following that week?” And just even hearing the question was somewhat crushing, because I'm not going to say I am having some success because of that event. That's not what I'm going to say. But what I am going to say is there is an element of my following base that got a little bit supercharged through an event that I wish that I could trade for the attention.
Now, here I feel people ask me, what do I want to keep doing about this, and do I feel a role in it, and all this. It's like first of all, I wish I never had the role. No, I don't feel a role right now. It's not my responsibility to go after Robinhood every single second. I'm not even a member of their community. The traders need to police their own stuff. Even Jim's podcast, and shoutout to Jim O'Shaughnessy for having me on his podcast, but the first 32 minutes of that don't happen, or whatever it is without talking about that incident. I'm not struggling, that's not the right word to use, but there is just an element of fuck, I just I wish that I didn't have that event in my life. That was really, really hard, because it was my wife's cousin, he's not my cousin, and she's reeling from a loss the same time that I'm reeling from a loss, and once the family really decided to get public with it, you have one news cycle to fight a battle. That news cycle doesn't wait for your family to mourn. To be playing with that fire in those circumstances with somebody else's biggest event in their life and a huge event in my life but nothing can compare to what they were going through, I don't know, man, I never want to live through that again, and I can't live through that specific thing again, but I don't wish that upon anybody. I don't want it to happen. That was really hard.
And then moving when-- I think I did the right thing by moving. I think there were some things down here that I didn't realize. I could help my grandma with and now I can, and my kids are happier down here. So, I made a lot of decisions in 2020 that were good. I was definitely not the best husband. I have this disease where I'm just obsessed with work and investments and stuff way too often, and I need to unplug and be there for my wife specifically, but my family a little bit more. But that said, I am better than I could be, and I'm not the worst.
Once upon a time, I bought her a book that said, 50 Boyfriends Worse Than Yours to make myself look relatively better, and I'm no longer-- I don't need to give her that book anymore. I think I've improved a tad, but I don't know, man, it's not that easy to sit on a mic and say, “Hey, I killed 2020,” because there's so much suffering around. My mom, she's alone and she's a hustler, and she was killing it in real estate, and she's done a lot of the hard work to get her life to where it was really humming, and she was just doing really well in real estate. She's in Scottsdale. If anybody's buying a house in Scottsdale, shoutout my mom, she'll get you a deal. She knows her shit, especially in downtown Chicago. I'd tell you nobody's going to work harder. But COVID comes and she doesn't have a huge cushion. And now all of a sudden-- she’s not married, she's got a dog, but now she can't even see people, and she's a social person. She's stuck inside. She went through a pretty bad medical issue too that was not COVID related, and it’s hard. It was hard not to be able to go out and visit her. It was hard to watch her feel alone, it was hard to watch her struggle with being worried that she wouldn't be able to get another lead because she's a fantastic realtor but she's a flesh presser. She's great when she's in front of people. She's not the most savvy on the internet. So, there's just a lot of dichotomies that I had to live through that I'm really glad that the vaccine rollout is here, and hopefully we can all get back to life as we knew it.
I don't know, man. I just hope that that some of what I did was-- I guess I came out publicly in a big way in favor of mental health awareness, and the reason is just I just think it's so important, and I think that so many people struggle with it, and each family is different. I'm not trying to out my family's dirty laundry, I'm just trying to be an example for people that may feel like they're in a dark place. I wouldn't say that like I suffered from depression when my flooring business failed, but because depression’s especially insidious, I don't think that that does justice to depression to say what I was in. I was in a dark spot, and that's slightly different. I could still see light. I don't know, man, I just hope somebody hears some of the stuff that I talked about, and they say like, “All right, I'm not alone here,” or “It's okay to reach out to people for help,” or whatever. So, that’s my answer.
Austin: When did the flooring business fail?
Bill: That was right after law school. I was totally unprepared, and it was 2009, and I was so naïve. I was like, “Oh, well, I'm going to buy this franchise,” and I didn't even really like the franchise name. It was a stupid name. I'm not going to put it on blast, because why. I feel like I thought buying a franchise would put a lot of boundaries around me, and a support system around me in a way that maybe was a little unfair to the franchise were to expect. I would also argue that if you look at the cohorts of people that came into the franchise, and you book and not even just my class, but the years before and after, if I was asking due diligence on that, I might go into some of why that churn rate occurred. So, I'm pretty sure, I'm outside of my-- Yeah, I think we're good. I had a little bit of a-- I’ve got to remain silent about some stuff just because I don't really feel getting into shit. And to be fair, man, those are good people. It's tough. How do you run a business in 2009 when you’re selling flooring? Not a whole lot of discretionary purchases.
Austin: [crosstalk] When you said the date, yeah. I didn't even know that. I didn't know you had the flooring business, and you were a failed business owner.
Bill: I big time failed. I wouldn't even call it a flooring business. I mostly just paid other people's marketing for leads. I'll tell you what, it's hard for me to buy into Angie's List because of that experience. Because I was the guy that bought the leads, and I was the guy that received the text message, and I'm the guy that didn't know shit about what I was doing that ended up on somebody's door bidding against two other people, and we were rushing. I would call people, I get a text from the lead gen service, and I'd be calling them at 11:30, because if you don't snap on that lead, it's dead forever. I'm here to tell you folks, you don't want me showing up to your house to sell you a floor. That's half of why I failed. I was incompetent. Then, I think like, “Well, how do I get tradespeople at my work, or at my house?” All it is, is recommendations. All I do is ask people who do you know, and all the good tradespeople are taken.
So, I just can't quite get there to believe that the future is as easy as, oh, there's this marketplace and people are going to buy a single price offering and I love the story of it. I think that the adoption curve maybe-- I guess it's just too damn hard for me to actually buy into it. But I hope it works because I know a lot of people I love, I like I see, I got a lot of respect for those guys, but it's just hard, and that's the thing that's tough. Here I am, sitting in a house doing a podcast, and you've got big time hedge fund guys, emerging managers that I respect, you've got IACs reputation, and like, who the hell am I to say that I don't think that Angie's List is something that I can get behind fully? Because I'm nobody. But also, I did live that life for a little while, and that product probably has changed a lot. But I just have a different view.
Austin: Yeah, and you don't have to own everything. So, the mentioned mental health and we talked about it a little bit. Again, I think the thing that people have connected with so well with your podcast and just you in general is, the things you talk about and being open about them, and so I think when you asked me about coming on the show, one of the things I was excited about was, I've talked about those things as well, and I think maybe we're not as important as we think we are. We don't have the potential to help people know that they're not alone or whatever that we think we do. But maybe there's a couple of people who just need to hear it, not that either of us are medical professionals or psychologists or anything but the whole 2020 thing, it was a hard year, and whether this is coming from me, who's somebody that I've got a job, I’ve got a family, a healthy family, we're okay, you almost feel wrong for saying that it was a hard year for thinking it was a hard year. But I think the message or anybody remembers me on this podcast, the thing that I want people to think about was just that if you're struggling with things, and you're--
I had an email newsletter. I'm going to get started writing it again. We just had a kid, so that takes up a lot of time, but the posts that people connected most with were the ones when I wrote about my wife and I having two miscarriages. Whether it's a suicide-- Everything's different and everybody has their own challenges, and it's not about like, “Hey, this is as hard as that,” or anything like that. It's just like, everybody goes through their own stuff and deals with their own ways, and whether you're dealing with suicides, and friends, or family or miscarriages or whatever, the easiest thing to do is to blame yourself, and to think that you're alone, or that there's other people that aren't having gone through it or aren't feeling that way, and then when you start to feel that way, you start to think some really dark things, and who knows how bad that can get. So, A, there's suicide hotlines and there's professionals to talk to, if there's truly depression or suicidal thoughts or anything like that. But the notion of having hard days mentally and struggling with things, it has helped me so much to talk about that and be able to open up. To the day that the Capitol got almost overtaken, I posted on Twitter that I was just having a really hard day mentally, and Twitter can be a nasty, dirty place. The amount of love and DMs and replies that I got that were like, “Wow, I've been struggling with the same things and having mental health challenges or hard mental health days the last couple of weeks too. Seeing this stuff is hard for me.” The amount of replies I got, it just means the world to me, and it helped me get through what I was going through.
I know I'm rambling a lot here, but I appreciate that you talk about mental health, neither of us are trying to recommend anything specifically for people. We're not psychologists, and so, I want to make it very clear. There are suicidal thoughts and thoughts of hurting yourself or something like that. There's doctors and hotlines and reach out and get that help. But it's okay to have bad days and admit it. In my military job, we lost people in training, and there were people with suicide attempts and things like that. And when there were suicide attempts, a lot of the times it comes from people that-- The persona is like these people are so strong there. They never talk about needing help, like, they don't need help, and then all of a sudden, you get news that there was an attempted suicide, and it's from somebody who felt they couldn't talk about things or they had to put out this perception of strength or it was weak to talk about problems or anything. It's just like, I don't know, we're living through hard times, and it's okay to feel that and even if you're in a good situation, it's okay to have tough days.
Bill: Yeah, no doubt. I've been asked by somebody close to me, they were like, “You're trying to have a Dr. Phil Show?” and it's like, “No, I'm not trying to have a Dr. Phil Show,” but I do want to advance some disease discussion, not like where people have to just come here and emote. That's certainly not what I want the podcast rep to be like, “Oh, you’ve got to go on Brewster’s show and cry,” or some shit. No way, but I've been there. I failed in the flooring business. I didn't know what the hell I was doing with my life pretty much until three years ago, and even until last year, I'm not sure that I really felt like a man. Now, I know I do. Now, I'm sure life will kick me in the ass, because that's how these things go.
But I just think it's important to identify that it's not all roses. and I think sometimes, especially in the investment industry, there's these guys that are titans and you don't know what they gave up. I love Buffet, Lord knows, but I don't want to trade what he had to trade to become him. I just don't. And if that means that I can't work for people because of that, I used to be really ashamed of that. I used to be like, “No, I want to work--” I don't. I no longer want to work for that. I want to work, if I ever work with anybody ever again, I want to work with people that I like, with people that I respect. I'd probably be better off in some portfolio management or sales role or whatever. I don't think I’m the world's hungriest analyst anymore, and I'm okay with that. And that doesn't mean that I don't care. Don't get me wrong, I'm trying to beat people with results.
But there comes a point in my days that I try to shut off. Now that said, I am obsessed with this freaking podcast, and I do want it to work. And I don't even know what work means, but I want whenever-- If it continues to go on, I want people to say in a year that it was as good as it started. If it has to go away someday, I want people to be like, “You know what? That was a really dope catalog of discussions and interviews about investments and life.” So, we'll see man. I think we're all working on trying to get better every day.
Austin: Yeah, your point about what Buffett had to give up his-- When I joined the Air Force as an officer, it's a pretty clear-- All this stuff’s online, but you can look at all right. After two years, you're going to be this rank, after another two years, you're going to be this rank, and then, this is what that progression looks like. It's pretty automated for the first four to eight years. But then, making a career out of the military, it starts to get, you can say, a lot more competitive, a lot more selective in terms of promotions after about the 10-year mark, and then if you get to 20 years, and you retire on active duty, you get a pension for the rest of your life and all this stuff. A lot of people who make it to the eight-year mark, are like, “Well, might as well just stay another 12 years and get that pension for the rest of my life.” So, you start to look at the people who are in those positions they've been in for 18 to 20 years and the colonels, are the people that are running, they're almost regional managers of different companies, if you think about it in the corporate world. And I was in a position when I was at my six-year mark, four-to-six-year mark, where I worked very closely with people that had been in 18 and 20 years, and I started to see the sacrifices that they had had to make in their families and certain assignments they had to take and things that they had to do, I had the same realization, as you. I was like, “Yes, I have nothing but respect for them. I think it's important.” But I had to get over this preconceived notion that I had when I joined that I wanted to make it a career and be in for 20 years and your identity is associated with it. And then, I realized, like, “I don't want that for my family, and I don't want to give up those things, and I don't necessarily want the lives that they have. It works for them, but it just wouldn't work for me.” That was hard to get over, and so whether-- not everyone's in the military, and not everybody learns after Buffett or is dealing with the same things as you, but people put that same pressure on themselves is to live up to these expectations that you have for yourself or your boss as or whatever. And it's okay, if you realize one day that that's not what you want. But we associate our identities with our profession a lot of the time and it's a tough thing to get over.
Bill: Yeah, no doubt. I'll tell you what, if I was a young kid, one of these younger male listeners, or a female, I'm sorry that I generalized, its finance, I shouldn't assume it's male. It's a problem with the industry I admit. I'm going to try to get women on the pod. I get it. But go in and crush it, because the years that when you're young and you don't have kids are going to be a whole lot easier to give that time up than once you start to have a family. I guess part of when I'm saying that I don't want to be the best analyst, I want to be known as somebody that when I have an opinion, I thought about it very hard. I don't want to be somebody that is just known as a guy that pitches stocks that he doesn't think about. That's not what I'm saying at all.
What I am saying is, if you've got the database of the entire world in your portfolio, and you're following everything, and you think that I'm not talking about the most attractive potential risk reward, I’m probably not. I'm just trying to find stuff that I can do to make money and feed myself. So far for me, that's worked out. But that's part of why I'm not comfortable running outside capital. Now, do I have to get over that and should I consider, I don't know, doing an ETF strategy, maybe for outside people? But the other side's-- what could you imagine if I had like, I think half the reason that this podcast is good is because I don't have any restrictions around me. Why the hell would I ruin that? That's the craziest thing I can think of, for something that I don't really want anyway when I really want this. So, I'm just going to do this.
Austin: Yeah, and then it's like, if you were to do some type of ETF strategy, the responsibility that brings on all this other stuff is that ultimately worth it in the end? There's all these great ways and things that we can do, and you just have to decide what you want to do and what makes sense for you. There's a lot of people that have really good lives that have great podcasts and popular YouTube channels or whatever.
Bill: [laughs] That’s right. I don't know that I want to be some finfluencer for my whole life. The one thing is man, I really respect that Buffett and Munger teach, and I really appreciate that-- I don't have that much that I can teach people. Man, this guestlist has been killer, and I'm really grateful that you're here, man. I've enjoyed this conversation, and I'm saying it more and more after all the conversations, and the quality of the recommendations that are coming in are getting better and better. I just hope that I can help facilitate a learning discussion, and that'll probably end up being my contribution to finance when it's all said and done, but that's a pretty good one in my opinion.
Austin: Well, thanks for saying that. I love being here, and just think about what we've talked about and then your other conversations, I don't know if people are going to get value out of this and enjoy. I don't think that I provided anything super insightful. Maybe it's having-- [crosstalk]
Bill: I enjoyed the conversation. I liked how you thought about Zoom and Peloton, man. I thought that was really-- Because I like getting inside of a mind that's doing things in a different way, and I think it's fun to have a conversation between two people that view the world differently. We're not that different at the end of the day.
Austin: Yeah.
Bill: How you and I are trying to make money really isn't actually that different. We're just playing in different asset classes for the most part, even though they're both stocks.
Austin: The thing you talked about though, you don't want to be a finfluencer, I wouldn't discredit that too much, because what podcasts are email, newsletters, Twitter, whatever, that's your resume. That's your portfolio wherever. And the interesting thing to think about is, if Munger and Buffett were starting today, I guarantee you they would have a podcast, and they'd be on Twitter, and that's how they would teach. Who knows if the Berkshire annual meeting would even be a thing? It's interesting to think about what if they were starting today? They could teach the most people if you think about it through scaling a podcast or Twitter or whatever, so. Maybe you're just the next generation’s Buffett.
Bill: Oh, shit. That's the nicest thing anybody's ever said to me. Thank you. I appreciate that. The Buff Dawg Part Two.
Austin: There you go.
Bill: The Buff Dawg. That's what people better start calling me. No, I appreciate it, man. I think you're right. I also think that I have had people say, “How do you run so much media and run your capital?” There are days that I don't do anything except for basically promote my podcast now. So, if somebody wants to say, I'm not doing the deep work every day, yeah, you're right. I'm not. But I am trying to build a brand, and I am trying to build a podcast that I think has real asymmetric upside. So, I don't really understand what reading a 10K-- that seems a really bad use of my time relative to what I think I might be able to do, and if that's wrong, then that's a choice that I'm okay living with. I do think that there's-- What Andrew Wrangley or Andrew Walker, I'm sorry to call you Andrew Wrangley, but that's the association. What Andrew Walker is building with his podcast that he's basically becoming a hub of pitches, that is brilliant. So, there's different things that you can do. The Chitchat Money guys are doing it too. I just happened to be in a different what's in my ear, but that's really smart.
Austin: Yeah, so, A, your podcast is an investment. And then, B, I think one of the things that you can trick yourself in when you're investing is to think that more time and more work equals better outcomes all the time, which I don't think it always does. Sometimes, the best thing to do is to read about other stuff or learn about other things or not think about investing because at some point, you're just reaffirming confirmation biases, which can be really dangerous when it gets too invested. I'm not saying not to focus time on it, and all this stuff. It's okay to do other things too.
Bill: Dude, debating with you on Twitter and having our little back and forth has changed the way that I look at the world. How is that not a good use of time?
Austin: Yeah, exactly. Yeah.
Bill: So, that's what it gives me. Not everybody has the opportunity, but I tell the young kids, I talked to a class the other night, I said, “If I were you guys, I would start anonymous Twitter accounts, and I would follow the people that are interesting to you, and I would sit there, and I would think, and I would think, and I would think about how to add value to their life.” The nice thing about being anonymous on Twitter is if you’re total dogshit, you can just start another account. Treat people's time with the respect that it deserves. Try to add value, and then if you're really good at it, you can unveil yourself as whatever. That's my two cents. I got diverted because I think that I looked and we don't have video on this part 2. But that's okay. [laughs]
Austin: Oh, no.
Bill: We got the audio. They'll have to stare at my face for the last half, but the first part has it. So, yeah, anyway, I would just add value, and I don't know. It's my best advice, man. The other thing is, people have been like, “Well, how have you built a following?” That's how. All I have ever tried to do every single day is put more value out into that community than I have extracted.
Austin: Yep.
Bill: That's what I think my edge is, and if that's not edge, then I don't have one.
Austin: That's an argument-- like you said, anonymous Twitter accounts, but I think a Twitter account with your name especially as long as you're not talking about crazy stuff is a great way to have a resume and get hired at companies. Gary Vaynerchuk, who I have mixed feelings about him, but the one thing that I agree with that he says is like, “One of the best things you can do using social media is document your journey. You don't have to be an expert to be out there talking about things as long as you're presenting yourself as somebody that's learning and then sharing and educating along the way.” That’s the people connect--
Bill: Oh, that makes sense. I could buy that.
Austin: People connect with that journey and seeing you grow and develop over time, as long as you're not saying that you're an expert when you're not which, none of us are. So, yeah, I don't know, but the anonymously--
Bill: It's hard to argue. That's not why I've connected with people. I've been pretty open to the process.
Austin: Exactly. Yeah, and that's what I'm saying is, if you had an anonymous account, I don't know that you would have the relationships with people that you have that make the conversations go the way that they do.
Bill: Yeah, most definitely not. Most definitely not. I was talking to young kids, and I was thinking to myself, “Would I have been ready to run an account behind my own name when I was that young?” [crosstalk] I would have been doing something stupid at some point that I just want to want my name associated with so-
Austin: Very true.
Bill: -that was my thought.
Austin: Yeah.
Bill: All right, dude. Well, your alarms going off, and I’m going to let you go, but I've had a fantastic time and thank you for stopping by The Brew.
Austin: Yeah, of course. Thanks for having me here, Bill.
Bill: Soon to be known as the Buff Dawg Part 2.
Austin: Yeah.
Bill: Not really.
Austin: I had a good time, and appreciate, and respect all the work that you're doing. So, I’m excited about our friendship growing.
Bill: As am I, man. You take care of yourself and good luck with the portfolio.
Austin: Thank you. Thank you.
