Kyle Mowery - Uncovering Hidden Growth Engines
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[The Business Brew theme] Bill: Ladies and gentlemen, welcome to The Business Brew. I'm your host, Bill Brewster. This episode features Kyle Mowery. Kyle is a heck of a guy. I've known him now for, I think, it's three years. The days are long and years are quick. He's a great guy. I think he does great work. But I'm really grateful for our friendship and I'm grateful that in the group of people that he speaks with. So, I think as far as the depths of the ideas go, if you want to hear how deep he goes on ideas, check out his podcast with Andrew Walker at Yet Another Value Podcast. They did one on Orion Engineered Carbons. We talk about Orion. I am long Orion. So, I don't think I did the best job at pushing back on this one. Shoutout to my main homie, Matthew Passy, for the production on the podcast. I listened and noticed he's got some editing tips or tricks for audio and they have carried those over to video nicely, and I'm happy with the way that it sounded. Slight deviation in the conversation around 26 minutes. Talked about Chicago a little bit. To the extent, it ruined the flow. My apologies, consequence of the format. Something that I think a lot of the smaller cap professional people that listen to this podcast may like about this episode. Check out, we talked about Kyle's entity, CoVest Select and it comes up around 48 minutes into the conversation. So, however long this intro is, add that to the 48 minutes. And you will hear about CoVest Select. I think it's a very cool product that Kyle has created. Disclaimers: This discussion expresses GrizzlyRock's research opinions. You should assume that as of the publication date of this podcast, one or more clients of GrizzlyRock Capital and CoVest Select has a long position in the stock discussed and stands to benefit, if its share price increases. Following publication of this podcast, GrizzlyRock intends to continue transacting in the securities of the company covered herein and may be long, short, or neutral at any time hereafter. Opinions are based upon interpretation of certain facts and observations, all of which are based upon publicly available information. As for my disclaimer, as always, none of this is financial advice. All of the information contained in this program is for entertainment purposes only. Please consult your financial advisor before making investment decisions and do your own due diligence. With that out of the way, here's the pod. Ladies and gentlemen, Kyle Mowery, a guy who would-- I think it was seven years ago, I reached out to somebody and I said, "Who should I meet in Chicago?" And they said, "Kyle Mowery is the guy that you need to know." And I think it only took us four years after that to meet each other and here we are. Kyle: Here we are. Bill: So, thank you for coming on. Kyle: Yeah. And you're no longer in Chicago, which is nice for you in January. Bill: Yes, in January. But right now, it's a sad thing. Kyle: It's pretty nice in September. Yeah. Bill: I was just up there, man. It was super nice. I hung out with some college friends. It was a good time. So, we were talking offline before we came on and I just like to pick your brain on some macro stuff, which is bound to be wrong first. Have you ever seen a macro backdrop like this? The thing that we were specifically talking about was, I got a bid for the tile in my house and I'm convinced that I should have learned to lay tile a little bit earlier. And labor is so tight and yet everything that we're looking at seems to scream global recession, rates are going up. How do you contextualize what we're looking at from an economic standpoint? You've been in the business for, what, over a decade. So, how does this line up to what you've seen in the past? Kyle: Yeah, I think other than 08[?], which was its own thing, years and decades really in the making. I was so young at the time. I was investing professionally, but I didn't really grasp it. I didn't have the background to grasp it. This is probably the hardest macro that I've seen, because there's a lot of things that are bullish and there's a lot of things that are bearish, and you got supply chains all. It's still trying to normalize. You got nationalism and onshoring of production. And yeah, you got a labor shortage. Like you're mentioning with housing, and contracting, and look at the percentage of electricians and folks that are in trades that are in their 50s and where are they going to go in 10 years, if they're probably not going to be laying tile. So, it might be you and I lay on that tile in your house. Bill: I'll tell you what, with the rates that they're charging, I would get a nice raise by doing that. It's crazy. Kyle: Yeah. Well, kids will be a little bit older in a couple of years to put them to work. Bill: Yeah, that's fair. Yeah, a little child labor, that would be nice operating leverage in my business. Kyle: Yeah. Bill: What did 08 teach you about investing? One of the things that you and I have previously discussed is you said that-- I forget exactly how you said it. But it was something about, I guess, my paraphrasing would be, "You can wait to take the risk later until you're on the other side." But I'm curious to just hear you riff on what you learned in '08 and how that felt to the extent you remember it? Kyle: Yeah. I graduated college in '05. I went to work at a hedge fund of funds. But my first real investing job began in summer of '07. And the week that I started the front-page article in the Wall Street Journal explaining what a PIK toggle bond was. It turns out that was the last chapter out of Vietnam, proverbially. And it was really, really interesting 18, 24 months thereafter. Very much different than now. This is nothing like '08. '08 was systemic in such a way that it was how close we actually got to the precipice. It has been well covered, but you could feel it. You could feel it. I remember talking to my wife about, "Okay, there might not be a financial industry. What are we going to do?" And we were in our mid-20s. So, yeah, it was pretty wild. Bill: What is a PIK toggle bond for those at home? Kyle: Oh, for the non-credit nerds, payment-in-kind, when they can pay you more bonds, it's like dumb and dumber, when he says, he's given out all those IOUs as basically it's what is. Bill: It's just good as money. Kyle: That's effectively PIK toggle-- Yeah. Bill: [laughs] Kyle: Yeah. Bill: So, you started a mezzanine debt, right? Kyle: Yeah, I started in high yield before business school. What happened was, look, I'm a value guy. I know that wasn't popular the last decade. Maybe now, it's going to be come back into prominence. But Buffett, Munger, Seth Klarman, these are the folks that formed my thinking broadly. But credit and small cap equities, which was what I do now, very similar. You're studying business, you're studying free cash flow, and you higher up in the stack. So, I got my first job in credit on purpose to really get going in that area. And then I transitioned equities, because I got tired of getting do all this work. Buy some in 95, and it would go away at par, and I have to go do all the work over again. I said, "Well, we're hanging on. It's basically the same as small cap equities. Let's go see if we can make 50%, 100%, or more percent," right? So, I ended up transitioning and now, I work almost predominantly in small cap equities. Bill: When you say small cap equities, how would you define that? Kyle: Yeah. I'm trying to think of a way that won't get me busted by the authorities of describing it. $1 to $3 billion is a sweet spot. I think from a market cap perspective, they're real companies. They're not beholden to one personality, or couple of different sales folks, or one set of folks operating a business. They're real companies, but they're not companies that have 20 sell side analysts and hundreds of biocide analysts. And you can still get a fundamental edge by doing publicly available work, going to conferences. Not financial conferences, not like industry conferences. Go to conferences, where you're the only person there who works in an investing role. It's public. You buy a ticket, you go, and you learn. You learn the industry. There's a lot of things that can be picked up about businesses and industries that it's public. But assemble it through mosaic theory. There's one for you with your fancy CFA. Bill: Yeah, that's right. That's what I learned. That's basically it. Kyle: Mosaic theory. Bill: Yeah, you're fine. If you do mosaic theory, you're fine. Kyle: It works in small caps? Bill: Yeah. Why not go even smaller? Kyle: They're not real businesses. I've done microcaps. I've never really done nano caps. I think you want to be-- Personally, if I'm investing in small companies, you're effectively investing in people. And if you're investing in people, just do it privately. Because with the microcap, there's always you get in, and then all of a sudden, somebody wants to blow out. And the next thing, you are down 30%. You've just made the investment, nothing has changed. It can be very frustrating. Or, CEO gets a cult of personality, and all of a sudden, they leave or they make a poor acquisition and there's no board oversight. Although I say that small caps don't exactly have wonderful corporate governance either but the range is a lot broader in small caps. And you can find very good managers with very good corporate governance in a way that microcaps. You go in and you see, they seem so cheap, and then you get bit on hand a couple of times. And I took my ball and went back to small caps. Just go to bigger companies, more real companies and that's worked well for us over the years. Bill: No. Well, I was talking to a fairly well-known small cap guy and he said the same thing. He was like, "Look, if I were you, I would not focus on the really small stuff. I would probably start at a billion." I think that that's a pretty smart idea. I have seen some of the work you've done and I think it would be helpful to understand the level of due diligence that you do putting together a thesis, because the decks that you send are, I don't see that level of due diligence in many places. I just be curious to hear you riff on what due diligence looks like to you and at what point do you know for lack of a better question, because you put so much work in. How do you know like, "Okay, now, I've gotten over the line versus that incremental piece of information," where you're wasting your time from a decision-making standpoint. Kyle: The best ideas are the ideas that as you peel back the onion, it just gets better and better and better and you can't even believe that the market is pricing it where it is. And it's so rare. But positive intermittent reinforcement, it's one of the most-- the dopamine hit is incredible. And when you do it for a living, you spent a lot of time looking at ideas that are good ideas. Yeah, you can make money on good ideas. But when you find those very special ideas, and you unwrap it, and you get into the diligence, and you realize, you can make a ton of money, a really significant return, that's what gets us out of bed in the morning and that's why we keep doing it. And then in terms of the depth, thank you for your comments. I think we do high-quality work. I think there's a lot of people in the small cap world that do really high-quality work. I think the key for us is, why can we do 125-page decks? Because we're only focused on things that are significantly mispriced misunderstood. I'm not trying to make 25% on an equity. I'm trying to make 50% to 100%. And when you're doing that, there's just so many things that are-- The markets fairly efficient. There's a lot of smart people out there investing in small cap. It's rare when something is wildly inefficient. But when you find it, you can just go in a hole for a month or as a team, divide and conquer and do it in two or three weeks, and you can come out with something that could pay benefit for your investors for years. And that's really when we look back-- I want to be very careful not to talk about. We run a private funds. I can't talk too much about it. But when it looked back at the things that have gone well in summation, it's these the best ideas that really do drive everything going forward. Bill: Can we talk about a previous idea that you had or is that not allowed at all? Kyle: Yeah, we can. [crosstalk] Bill: Because I'd be curious to hear you riff on Darling, and what you saw and when you saw it and what the market was missing. Kyle: Yeah. Sure. Bill: Okay. You mind describing the setup there. Actually, I bank Darling. Well, I didn't bank-- I wasn't the banker, but I helped underwrite the credit, when it was a just a sleepy rendering business for lack of a better term. And what did you see that the market was missing and when did you see it? Kyle: Yes, the Darling ingredients a large rendering business. Necessary business, but not a very sexy business. And one of the tools in our toolkit is value investors is margin reversion and that can work on the long side, that can work on the short side. In 2015, 2016, broader commodity prices, protein commodity prices were on the downswing. So, Darling missed, we got punished by investors, they had made some poor capital allocation decisions in terms of growth, they had paid a high multiple for a couple of businesses. Now, they look like good acquisitions. And strategically, they made sense. The prices they paid were just far too high, high multiples on high cycle margins. And then when you miss and you're levered and the economy is looking a little questionable, then you get punished. And that for a fundamental small cap focus person, you can look out and say, "Okay, there's a pretty reasonable chance to make 50% over two years." And that might be a good position. Not a great position, but a good position. That'd be a good return. I think most people would take that in a base case with not too much risk. So, we've got involved, started really understanding it, spent a lot of time. And one of the things that they had been working on to diversify, it's effectively proteins and fats are what the value is other than the waste management aspect for protein production, i.e., slaughterhouses, just to call a spade a spade. But on that protein and fat side, they're looking at ways to hedge and mitigate that cyclical exposure. And so, they were talking about this thing called renewable diesel. And when we made the investment, it was part of the thesis, sure. But it was a growing market. And it wasn't a market that was saturated. Fast forward a couple years to 2019, it is a largest position. Renewable diesel is something that was on everyone's mind. People understand what it is now. Renewable diesel is chemically identical to fossil-based diesel. It's being used in trucks in California, cars in the EU, and there's a whole bunch of statutes and reasons why that's going to be continually growing in a secular manner. But in 2019, at Chicago based conference Invest for Kids, we presented the idea at 19 a share. And we're no longer involved, but I think it said about 70 is share. Why were we right and what was the magnitude of being right was the maturation of the renewable diesel market. And going from something that was cute and a hedge to the fats to being the core driver of the business. It has to do with sustainability, decarbonization of the industrial and energy ecosystem. And Darling was a vertically integrated in terms of the feedstocks, the fats that went into the process. It's called lipid hydrogenation. I won't bore you with the details. But it's just a fancy way to make fuel that goes into any trucking California out of what a non-fossil source. And so, it was vertically integrated. They were leading out and growing. They had a joint venture with Valero Energy called Diamond Green Diesel. They were expanding those plants in Louisiana. And now, they're also expanded in Texas. So, it's a wonderful business now. And the business has really escaped from being a commodity, a cyclical margin commodity business to something that has these secularly growing in markets. And that's how stock rerates from 19 to 70 is something changes in a big way. And they have the right unit economics, the right products and services to meet that growing demand and make a tremendous amount of cash which, which Darling does today. Bill: When you're talking about that, it sounds as though, this is an idea that was a bit of a margin reversion play. In the penalty box, it had a nascent business line that was growing underneath and was maybe the free option for lack of a better term. But it wasn't necessarily core to your initial thesis? Is that fair? Kyle: It is fair, but we never thought it could be a multi-bagger. The base case initially was, we can make 50% as margins come back over a year or two. But the best investments do not always require serendipity. But the best investments are when you pay a low multiple for something that is growing and a market doesn't recognize that it's growing. And it happens in small caps all the time. For example, right now, there's a business called Orion Engineered Carbons that everyone perceives as a cyclical commodity industrial. That's not the case. We think they're going to grow their core business into 23 and 24 before a whole host of reasons, a business is trading at 5.2 times. And by the way, at analyst point of view, they talk-- [crosstalk] Bill: 5.2 times, what? Kyle: Sorry, EBITDA. On our numbers for next year and this is not investing advice. Please read all the disclaimers on this-- [crosstalk] Bill: I'll read them before the pod. Kyle: Okay, good. Yeah. Orion is trading at 5.2 times. This year's EBITDA, we think it grows. Next year and the year after, we think there's free cash flow to owners. Owners' earnings is going to be on a percent 20% return. And they said this publicly at analyst day. "We're going to earn two thirds of our market cap between 2023 and 2025." So, it's massively transformational. And you're not paying for EV battery materials plant. They're building a $50 million EBITDA battery materials plant in Texas. So, they didn't announce who the customer is, but it's pretty darn close to the gigafactory and they can ship those products everywhere. When we talk about paying a low multiple for something that can grow, yeah, a call option, that's great. But not all of them hit. But when they do hit and Darling is an example of that. It did hit and the reason we made it a largest investment, rather than just a good investment was as it was hitting, it was clear to us, the market really wasn't recognizing it at all. And so, we had a line of sight to free cash flow, and numbers just inflecting in a massive way, and the street was asleep at the switch. And if you're doing small caps, you're going to make a lot of money that way over time. It just takes a long time. We had a lot of years of sitting there and talking about it, and no one really cared. But then when it works, it works. So, it's never linear this business that we're in, but it sure is fun. I can tell you that. Bill: Like a business, Orion, right now, it seems impossible to own. We've got a European recession, we've got natural gas problems over there. It's an industrial-- You're a hedge fund guy. You run long short. How don't you know to short it? Clearly, you can own a business like this is the pushback. But how do you stay long looking at a macro environment like this and why not trade tactically around an idea like this? Kyle: Different stripes to work for different people. And look, we've got the timing wrong on this one. It hasn't yet worked. It should have worked coming out of Analysts Day. But yes, as margin facilities in Cologne, Germany runs on natural gas the week after analyst day, Russians turned off the taps on Nord Stream. Now, we have EU energy security questions. On the Q2 call public disclosed information, $50 million would be the hit to EBITDA next year, if the natural gas in Cologne, Germany was reduced by 40%. This business, the midpoint of guidance this year is 325, but they have new facilities coming online in China this year and they brought on a facility in Italy earlier this year. So, we think the company can grow through recession, even if that hit occurs in Germany. But the market is not parsing that nearly as specific as we're trying to do. Price would indicate that we're wrong or at least, we're not right. But when we look out a year, two years, we see the free cash flow, we know how high-quality management is. Exceptional management quality here. $6 million invested personally by Corning Painter. He was at Air Products for almost three decades. Very difficult environment in terms of-- You're not going to escape through and be an average manager there. You're not going to be there. And he was there his whole career until taking over Orion. We see a situation where the headwinds are evident and obvious and yet, all the execution is going on free cash flow is on the come. The timing, yeah, I don't think we got it exactly perfect, but we're very confident in the team, very confident in the profile, and the necessary nature of their products. So, that's just an example of what works for us in small caps. Bill: Yeah, I think some of what I'm asking too is just a general philosophy that I see-- I have conflicting thoughts on this, because on one hand, if price goes against you, I think, probably, you're wrong. And when I say you, I don't mean you. I mean, just like a participant taking it. Kyle: Verbal. Kyle: Yeah, that's right. But now, now that prices are going against everybody, I wonder whether or not I'm thesis shifting. I wonder what is going on. And everybody's, it seems to me macro watching right now, staying long going into global recession. I guess, in the past, we've talked about the headaches associated with shorting. In this kind of environment, are you really glad that you know how to short and that you have a short book or how are you thinking about all that? Kyle: Well, that's the difference in the macro and the micro. You look at some of these scions of value investing, Munger had a number of 40% drawdowns per year and can one handle that volatility. Probably, can one build a business where you have multiple years now in this day and age with multiple 40-year declines. Probably, not. If you're trying to do it for a living, there's a certain amount of-- You probably want to be in a private markets be really doing something esoteric, long only public markets or you want to be long short, because there's periods in which you're just going to get overwhelmed with the waters either rising or the waters falling, and you seem really dumb when the waters falling and really smart when the waters rising, and probably, the reality is in the middle. And so, for me with my seminal, I was in my mid 20s for 07 through nine, that was scarring. That was exogenous and this wave just washed over most who are long only. And so, I said, "Okay, well, there's a mechanism here." And yet, it's not "approved by the greats." By Seth Klarman. He doesn't short, but his investor base is one of the most unique that's ever existed. And he can go into private markets, he can do real estate. And from my background and where I was coming from, it wasn't going to be the reality. For me, realizing that I'll make the preponderance of our profits on the long side, shorts about staying in the game. Obviously, given a public forum, I can't quote statistics, but we're in year 11. So, let's just say that we've stayed in the gap and shorts are certainly a big part of that. Bill: When I heard Klarman talk, he spent a lot of time speaking about real estate and how he found inefficiencies in real estate. And I thought that that was pretty interesting, because I think I'm going to hear Seth Klarman talk about public investing and whatnot. And most of the discussion was private market inefficiencies and real estate. And I thought I had a takeaway from that. That was like, "Oh, okay, here's where he's focused." Kyle: I don't mean to throw rocks at my own industry. But one of the things that I've always found a little funny is that we report net return. Sure, everyone in my opinion should report net, if you're reporting gross of fees. We can have a different conversation about charlatans and things. What do you make after--? 20%. Short-term is not the same as 20% long-term in most people's tax code. It's always given me a little nerdy that that's not the case. And Klarman's got a lot of taxable money as I understand it. So, they care about that. 1031 exchanges, my goodness, if we had that in small caps, it would seem like an outrage. But it's just as vestige of what it is and most people's largest investment is their home and white picket fence. That's the American way and away we go. But that's a vestige of the tax law and certainly something that I hope to take advantage of over the years. But in my chosen asset class and small cap public equities, we don't get that. But what Klarman does, I believe, a great job. I tell my investors, I'm like, "Look, I've been doing this. Now, we're in our 11th year. But if Klarman ever calls, I'll be at Logan so fast. You guys will be liquidating this on your own." Bill: Yeah, there's certain calls that if they come in, they trumped the current career, right? Kyle: Respectfully. Love my team. I love Chicago. But there's a lot of similarities between Boston and Chicago. Bill: Yeah, that's right. Yeah. Boston's an incredible city, man. I was hanging out there this summer. My cousin got married and I was like, "This is awesome." Kyle: Yeah, it's beautiful. Bill: I think there's something about-- No offense to New York listeners, which is 60% of you. I think there's something about being a second city and also being cold. I don't know, the people that come out of those places tend to-- I don't know, I like them. Kyle: Not only have I chosen to do value and free cash flow in the public markets, but I'm originally a Californian living in Chicago. So, how on Earth did this happen? I must be a glutton for punishment with the cold. I had the warmth and I gave it up. So, what are you going-- [crosstalk] Bill: I don't know. But then, now, you got a family and now, you're stuck, man. Kyle: I don't know. I don't know. Everything's different now with COVID. I know some people who moved to Florida during COVID. I don't know. Would you know anyone--? [crosstalk] Bill: Some say it's a good decision. Kyle: [laughs] Unless we need a tile guy. Bill: Yeah. Kyle: Unless you need a tile guy. Bill: Yeah, I actually hit up the guy that used to install flooring for me. And I said, "If I fly you down here, if it makes sense, would you come down for a month or whatever it'll take?" I hope it doesn't take a month. Lord. I like the Florida thing. How real is this crime stuff in Chicago? Kyle: It's pretty bad. Bill: That's what I was telling my buddy. He's like, "I think it's all just fear mongering." I said, "Dude, I know people that live there that are telling me that it's not good." Kyle: In Chicago, it has a really, really nasty-- And we can get into it, if you want history of segregation and really nasty racial stuff from way back. Bill: It's not that far back. It's the 50s, right? They had segregated beaches not all that long ago. Kyle: Okay, right. It's based on a definition and I think you lived in Chicago longer than I have. Bill: Did I really? 17 years is what I put in up there. Kyle: '07 to '22. 15 far. Bill: 15? Nice. Well, I got to recruit you, so that I can have you beat down to Florida. Kyle: Oh, I tell my wife about Florida all the time. But we have a family on the West Coast. I don't know, if that's-- Bill: That's all right. You can hang out with Chad. Kyle: I love Chad. I enjoyed that pod. Chad, I think, looks at the world in a really constructive way. He ends up doing some higher quality names that I'm like, "What's a free cash flow? Is it missing one in front of it? 5% free cash flow, but compounding names?" Yeah, we have a lot of overlap and we talk frequently. Yeah, he's good friend. Bill: Al right, let's finish this Chicago thing. My theory on what happened is, they've diverted a lot of the police to the areas that need policing, but without higher funding for the police. They need to increase the aggregate police, because I was in Lincoln Park, man. We moved from Old Town to Lincoln Park. And the week we moved in, a woman was robbed at gunpoint right outside my kitchen. A guy pointed a gun at her baby. I thought I left where I was at to get away from this. Kyle: Yeah, look, we've thought about leaving, because we've had friends leave because of it. They used to be isolated. And through 2020 and everything, it's less isolated, it's scary, but it's everywhere. July 4th, the issue up in this leafy. Bill: Yeah. Kyle: Green leafy suburbs. It's hard to know what's the right thing to do. I got a good friend of mine from business school, who's running for alderman. His name's Phil Conway. He's running for the new 34th district, I believe. I'm not as up to as I should be. But he's running on pro people helping the cops type of a platform. So, the elections in a few months. Bill: Oh, good for him. Kyle: Yeah, but he was trying to get involved. He's a naval reservist, former investment banker, former lawyer. He's is an interesting character. But now, he's digging into the city and he's trying to make things better. And I think we've been members of a church for 15 years in Cabrini-Green district, and we as a church body have tried to dig into that neighborhood and try and use the church building as a launching pad for the community. Bill: Is it on Clybourn there? Kyle: Yeah, well, Crosby. Yeah. Bill: Huh, I think I know the place. Kyle: Yeah. Bill: Interesting. Kyle: We do what we can. As a person of faith, that's really integral to how I try and live my life. Try and leave the world a better place each day. I certainly don't always get it right, but I try. And I think that's what we try and teach our kids and even in all this negativity and crime that there can be redemption. And that for me is really faith based. But yeah, that's how we try and live our life. Bill: That's cool, man. That's the collective action we all need. So, I hope your buddy is successful and I hope that you guys are successful at what you're doing it. We will make the world a better place. All right, back to investing. Something you just said, Chad focuses on higher quality, lower free cash flow stuff. Over your time as an investor-- I go back and forth on this, because I think that stocks are a little bit hard to mentally get for a lot of people. So, I think of it like real estate. Beachfront real estate theoretically would be the Heiko of the world. It always is accrued more and more value over time. And what I can't figure out is how much of my life experience is watching one big interest rate decline versus how much is reality. And I have this idea that scarcity accrues value over time. So, a truly rare business like ASML, in theory, if that's an accurate philosophy should accrue value over time. But then you look at these studies and it's like, value as a factor outperforms over time. And I think when interest rates go up, people start to get religion about some of these things. How have you thought about those higher quality businesses versus what you choose to traffic in and why do you continue to traffic where you do? Kyle: Well, a few weeks or a few months ago, you had an investor who did it more eloquently than I'm going to describe. There's two ways to have above average returns. It's to go super high-quality and write it out and be correct or you're dumpster diving, you're investing in businesses with high free cash flow. And you got to figure out your orientation. It does not to make it about Chad, but Chad knows waste management. The back of his hand, he knows the growth trajectory. He sees it. He understands it in such a way that when I look at something like waste management and I say to myself, "Am I taking multiple risk on the back end?" Basically, interest rates and multiples. it's shorthand. Shorthand DCF for are you taking a terminal risk. And to me, if I'm buying something at eight times, and I'm going to sell it, and it might be at six times, that's stressful. It just doesn't work for me. That's just me as a natural person, it just doesn't work for me. I want to buy something at a cheap multiple and then get the free cash flow and earnings inverting. And I'm looking for higher numbers and more secular correcting the narrative secular growth in markets. And now, that's going to be a higher multiple, so I can make money on the numbers going up and multiple going up. That's just how I'm wired. And I think it's so important, especially for your younger listeners. There's thousand ways to make money in the market. You have to find a style that works for you. That's repeatable. You have a process. And then if you're building a business around it or you're joining a team that that team and the orientation all matches up, because I can't tell you how many times I've seen investors lose money, because they sell at the wrong time, because they don't have the fortitude they thought they did or their clients don't have the fortitude. The client thought they did. The client was 100% earnest, gave money to a manager, told the manager to execute a strategy. But then something happens and away we go. The average mutual fund investor dramatically underperforms the average mutual fund. And that's a real issue and that's something that we've always tried to be pretty heavy handed in our private communications with investors is, "Hey, look, here's the strategy. We're going to stick to the strategy. We're not going to deviate." But there's going to be ups and there's going to be downs. Unless you're a renaissance or Citadel, there's ups and downs in your strategy. And that's just the way it is. So, you have to be emotionally ready to handle it. There's so many guys and gals out there who can do the investing, but don't have a stomach for it. You look at someone like Charlie Munger, who can just stomach volatility like nothing. And guess what, he's just genetically hardwired to be able to do that and others can't do that. I'm not wired like that. I'm not wired like Munger. Therefore, I don't run a concentrated portfolio with a few stocks like he does. And we're just different people. Now, my returns aren't as good as Munger and maybe you have to stack up time periods and all that. But I'm just using it as an example of a finding a style that works for you and sticking to it. Bill: When you're screening an idea or you're in the early stages, when I hear you talk, what percentage of your ideas would you say off the top of your head are like cyclical ideas? Kyle: More than most. More than the average investor. Bill: Yeah. You're looking at where are we in the cycle and then where do multiples normally trade. How do I normalize this? These are the types of questions that you're really focusing on. And then, how do we maybe get the juice? Kyle: Of the subindustry. So, yeah, we ended up working on certainly some unique businesses. Bill: For example, because you talked about it with Orion and I enjoyed talking with you and a couple other people about it. And somebody said, "Boy, this is supposed to have been working for a long time. It was embarrassed in 2015," or whatever. What does your checklist or your initial due diligence look for an Orion and where did your brain say, "Boy, I actually liked this idea." Kyle: Yeah. Look, so we initially invested in Orion in 2019. It was on the back of EU. EU, if you can remember back pre-COVID, it seems much longer ago than just three years, but it was only three years. The EU automobile industry had gone into recession. Some of their Orion's proprietary gas black formulations are the highest product quality. Why does BMW sparkle? That's carbon black and it's probably made in Cologne, Germany by Orion at their gas black facility, which they're expanding at a 50% ROIC right now. So, small plug for gas black. Bill: We'll get into acetylene black later. Kyle: Oh, boy, yeah, you have to extend the tape, if we started talking to acetylene. And we just looked at a business that I go to the Jeffrey's industrial conference every year. And every year, I talked to Orion and Cabot. And it was interesting, it's cyclical, it seemed like a boring business. But carbon black, yeah, it's a chemical and it's an industrial. But it's its own market. A lot of it goes into replacement tires, tires were out. This is a business that you can understand. It's going to be around for a while. Certainly, there's issues we can get into them. But the point is, you know what the business is and that you can trade. You can trade long and short. We initially bought it in '19 as the numbers were geared to inflect. And guess what, it is not great for a business in the transportation are tied to the transportation economy. Bill: I'm going to go with COVID. Kyle: Everyone's sitting at home for a year. Yeah. So, that was fun. But the quality of management and the things that were going on inside the company in terms of improvement of culture, incentivize the team to sell not on revenue, but on gross profit, it seems pretty obvious. Well, the sales guys and gals were just not incentivized to sell thinking about gross profit as they were on just moving volume. That's what you do in a commodity company. You move volume. But Orion is the world's number one, a leader in specialty products other than number three largest global manufacturer of what we're calling commodity rubber black. And even in within rubber black, they are skewed to the high-end technical tires, heavier tires. The cars are getting heavier, SUVs are getting more popular, et cetera. And that's before we get to EVs. EVs burn tires twice as fast as ICE powered cars, because they're heavier and they have far more torque. And a torque puts a lot of strain on the tire. And carbon black is what mixes with the rubber to give the tire rigidity. And so, they just were out a lot faster. Orion is perceived as this boring, unchanging industrial business. When actually, they're doing a lot in these new formulations and specialty products. Before we even get to EV battery materials and acetylene black, the markets just missing. And so, when you can buy it at a low price with a good management team, with an exceptional board, with an exceptional capital allocation. And it screens poorly, because it has no free cash flow because of an investment cycle that they're exiting in early 2023. That's where we can come in and do the qualitative work, understand the products, understand why the market sees, what the market does see, and yet, still be confident in the future that we think has a very high probability of occurring. And that for me as a bit of a classic value investor, free cash flow focus investor, that's the thing that we're trying to focus on. And one of those numbers can inflect what's the magnitude, how do we get paid? And for us, we count it in free cash flow. Bill: Would the market say back to you, you're underestimating the next investment cycle that's coming? What's the rebuttable presumption or the bear case for lack of a better term on why are you wrong here? Kyle: Yeah. Look, especially, business is certainly tied to global GDP. It looks like it's going down. It sure as heck look like it's going down in EU, where their crown jewel is in Cologne, Germany. We went dug through the German subsidiary filings and our guess is that it's about $120 million dollars of EBITDA. Now, that's a pretty wide range. That's a GrizzlyRock mosaic number. That's not a public number that's been disclosed by the company. They don't disclose it. But it's $120 million of EBITDA give or take on a 325, which is the midpoint of guidance this year. It's really meaningful and he is going to cycle, and especially, demand is going down. They like every industrial on the planet has rising input costs and how much can you pass through. You're going to pass through as much as you can. Or, you going to pass through all of it? Probably not. You're going to have declining demand and you're going to have declining margins for some of those products. Now, we think on balance, the numbers are still going to be far higher, because what we're seeing in rubber supply demand imbalance. The western world is continuing to build tire plants and yet, there's been no carbon black added for last 50 years. And then in the European area, 40% of the product was Ukrainian or Russian. And now, we have this tragedy of this terrible war and it's throwing into question, the production of those volumes. Just today, I was reading, Russia is mobilizing into their army, the entire energy companies are getting summons from the government to send their employees to the military. I was like, "Oh, my gosh, what is going on?" I think from Chicago, it's really hard to tell what's going on in Russia and how much carbon black is going to be produced. But what you're seeing is and you're seeing is from public comments from say, "Cabot is the largest rubber black manufacturer on the planet." Tire companies were coming to them three to four months earlier than ever before to talk about volumes for 2023. These are annual contracted volume. You're talking about a situation, where it's unprecedented demand. And so, now, you have all this demand from tire and industrial customers and only so much supply. And so, what does that do to pricing? It's basic economics one on one to pricing is going to be there. And that's what Cabot and Orion have been saying publicly. And the stocks haven't gone anywhere, but the economics makes sense. And so, getting in front of that and getting that eye into 23 and 24, that's the type of work that we try to do. Bill: When you say, you dug into to the German subsidiary, what does that look like? I'll just personalize it. I hear it and it's like, "Okay, well, what are you doing that's unique in that and how many people--?" In your career, what's your perception of the amount of people that are doing that level of work? Kyle: Well, when you run fairly concentrated in small caps, you have the time to do it. We don't really talk to the sell side. There's many that do exceptional work. But most of them are communicating something that the industry wants to get out or the management version. Our whole thesis is, go find disconfirming information. Go find information that disconfirms the management is. Look, management CEOs are also the chief salesman of their own stock and a stock is a currency, and a narrative, and story. That's all important. People are narrative creatures. I think I understand that more and more. Every year, I think I'm trying to teach my kids that, because numbers are numbers. But we as human beings are not linear in such a way. We're emotional creatures. We are prone to only understanding things in narrative and story. And that's why oral storytelling, it sticks with you. These cultures that have existed for thousands of years have this deep culture of oral storytelling, because that's how you train teaching in parables. This is how you train the next generation in a way that will actually stick. So, I'm taking that and I'm trying to beat it in my own head on narrative going forward. Does that answer the question? Bill: Yeah, it does. You see it. I said, I hold cable an idiot. But I don't know, it's amazing to see how many people-- Look, there are certain people that have always been bearish cable. They're allowed to be bearish. Now, there are other people that are bearish, because the price is going down and it's interesting to watch. I think having the conviction to know-- I guess, what this period has taught me is, what names do I actually own and what do I actually know? And that's not to say that I'm correct on what I think I know. It's just to say that I know what I'm looking for and when I'll exit, and it's the names that I can actually own. Kyle: Well, you're very modest, but you also know some of these industries absolutely cold. And you're right for the right reason. You may or may not want to talk about it, but there's things that you hold I assume that you know you are right or at least on a probabilistic spectrum, your base case is wildly divergent than what the markets implying. Bill: Yeah, it's interesting. I guess, in bull markets-- You said it earlier. People look smarter than they are in bull markets. And right now, I probably look dumber than I am. And some of it's just repeating mantras to myself that says, "Get through to the other side" and a little bit of prayer sessions occasionally. Kyle: Well, I'm focused on balance sheet matters and you know how to read a balance sheet exceptionally well. Bill: Well, I hope so. We'll see. And I appreciate the kind words. Thank you. Let's say, I'm going to make you sell yourself here, because I know you're reticent too. But I think it's a cool idea that you came up with. Let's say, I have found an idea, and I've done the proper work, and I want to figure out how to raise money. Where would I maybe go to pitch somebody on whether or not they know how to raise money for a single idea? Kyle: Yeah, that's called putting the ball on the tee there. Thank you, buddy. Bill: [laughs] Well, I've watched you build it. I think it's really cool. It's a cool platform that you're working on. Kyle: Yeah. Well, we built it for ourselves. What Bill's referring to is, we built a platform called CoVest Select. That's covest-select.com. The platform is for small cap public equities in an SPV form. The institutional investor market is highly fragmented and is always looking for something unique and with an edge. And we realized, when we studied our numbers and not to get too far into the weeds, but when we were right for the right reason with the right timing, that was what made everything go. And a lot of our time is just water under the bridge, where you make some money, you don't make some money, but really exceptional ideas are rare. And most of the time, if you're running a PA or a fund, you're going to put it in at a certain percentage, because we all have constituents. Even if you're running your own money, you have a constituent of a spouse, or a family member, or a child that cares very deeply about that money is emotional. You put that idea at the right position size for you and that's different for everyone. But for those of us who are doing this professionally, we max the position out in our fund and then what do we do? We call our buddies, who would understand it and tell them about it, because they'll be the only ones that will listen to us talk for hours upon in. Bill: [laughs] Kyle: And thank you for being on that list, Bill, who will just let me yammer on about some cyclical-- [crosstalk] Bill: For carbon black company? Yes. Kyle: It's very sexy. Let me tell you about this carbon black industry. Bill: It's what I think is sexy about it, to be honest. There's not a ton of money rushing to get into it. I like that. Kyle: Yeah. What we said is, "Hey, let's create a platform. Let's create a platform that can tell these stories at the right time and curate the right time for the right investor audience. Let's build this platform. But once the platform is up, let's use it for our team, but let's also use it for our friends. Let's let our friends use it. Let's let others use it, who have an idea." When you have an idea and you're right for the right reason, it's the best feeling in the world. And then we said, there's a lot of managers who launched like, "I launched right out of business school." I launched David Einhorn style. I had less than a million dollars. And now, we're SEC registered. So, the growth has been something we've worked very hard at, but it's still something that we work on as opposed to someone who can go at a big shop and go to a center book and get something on at $100 million. It's a little bit easier. For a lot of managers, there's a lot of really smart managers that run $50 million that run $100 million or just launching or just coming out and creating their own businesses. Is there a platform to help them to help them grow their businesses get in front of institutional investors and grow their network? And by the way, grow a return on that idea. Good ideas are a dime a dozen. Great ideas, exceptional ideas, those should be rewarded and those should be offered, we think to the market as an SPV. So, it's private fund offering can't talk about that too much. We're not looking for investors here. What we're saying is, the platform exists that small cap managers working in concert with GrizzlyRock. We're taking it out as covest-select.com. We have a full-time marketer, we have a full time of series SPV that's already set up, we have SEC registered fund, admin account, and all of the things that you need. It took six months and hundreds of thousands of dollars to set up. But now, it's up and it exists and we're looking to partner with likeminded folks and try and do well together. Bill: How did you come up with this idea? I know you just gave the background of it. But is this something that you wish that you had as a younger manager and you were solving for a problem that you encountered? Kyle: I don't think public companies were accepted as an SPV. When I started, I think the institutional allocator community, there's so many opinions about that. But the allocator community has gotten significantly more sophisticated. Each year that I've been in the business, they're getting more and more sophisticated. And there's a lot of folks who are now a family offices, or endowments or things who have sat in a seat in allocated capital, meaningful capital. And they know what they're doing, they know how to do it, and they're interacting with managers more on ideas than just writing a check, and talking to the manager once a quarter reading the letter. There's folks that are still doing that and they prefer to interact with folks that our team in that way and that's great. But there's folks that really want to roll up their sleeves, dive into the ideas, read all the diligence, read all the expert call transcripts, do their own, go through the model, and really understand it. And those are my favorite to talk to because that's what I love doing. I'm an investing nerd. My team, that's what we enjoy doing, I will do it for longer than GrizzlyRock will exist. That's what I do. I enjoy it. And so, we're going to keep doing it. And we're creating this platform as a business opportunity to partner with folks. You have a great idea? Bring it. Someone who I've been friends with for 10 years and chatted ideas thousands of times, they can use the platform too. It's not for everybody. If you're at a bigger shop, you probably have your own market, you probably have your own co-investment vehicle. But I built it, because I was the other manager. I went to other managers to try and get that scale and that leverage, and I didn't have the ability to spin it up in the timeframe that I needed. I didn't have the ability to go to the right institutional allocators. But we have a full-time person, who's working on that, who's been doing it for multiple decades, who knows these folks can get them on the line and explain to them, "Here's why you should pay attention to this idea for the right reasons at the right time." It may or may not work as a platform, but it's certainly unique and we think it has a lot of promise for the small cap community. Bill: Something that I admire about you is your prowess as an entrepreneur. You alluded to how small you were when you started, and how you've grown your business, and how you've created CoVest Select. Did you grow up in an entrepreneurial household? How did this all start? Kyle: No, I did not grow up in an entrepreneur household. I grew up as a student athlete. I played baseball grow. I grew up in Southern California. You can play baseball about 365 days a year there. That was fun. That was my passion. I played in college. And towards the end of that career, I had this competitive drive and I always put it into baseball. In academics like, "Okay, well, you get good grades and then you go hit the ball." It's great life. But now, what do you do there? For me, my career ended in college. And now, what do you do? You've got to make your way in the world and there's something you could go to do to be competitive. And my wife, I love my wife. It is one of the best parts of my life is my relationship with her. We've been married 17 years and we describe each other lovingly as control enthusiasts. Bill: [laughs] Kyle: We're not control freaks, we control enthusiasts. Bill: I like that. Kyle: I just always had this burning desire to start a fund. And I talked to a lot of folks who are considering it and I try and talk people out of it, because it's all encompassing. It's really, really hard to put in the hours and have a life. For instance, I don't golf. I wish I did. It's super fun. I don’t golf, because why? Because I spent my 30s doing this. And I don't regret it, but it's just a choice you make. So, it's just a choice that I made, and I had to scratch the itch, and we're still going. But it's not for everybody. It's really, really hard. It's not just the investing. It's the business stuff. It's the paperwork. It's the marketing. It's the hours that go into it. I think for most people, they're better off going to a bigger shop and established shop and really building their own career. And if you play my life a hundred times, I probably do that a whole bunch of times. But thank you for your comments on the entrepreneurial front. But I don't necessarily consider myself a great entrepreneur. We built a business that's still around, but we have more to go right. And now, I think with CoVest, we're going in the thing that I know best, small cap investing. And yeah, I'm really excited for it, and hope to partner with a number of folks, and maybe I'll be doing an idea with you someday. Bill: Possibly. We'll see. I got to come up with one that's worthy of it. Kyle: I'll come down. We'll do the diligence in January. You come up here in the summer. Bill: I could do that. When we talked about doing this podcast, you said that we could do an hour on this. I don't think we need to do an hour. But do you want to drop some lessons for people starting a fund or things you wish you knew? Kyle: It's so hard. Everybody tells you, "Okay, you got to get three years of audited track record." Okay, well, you do that and then they say, "Oh, but you're not big enough." And then you get bigger and then they say, "Oh, it's just so hard." And I want to save people a lot of the pain and suffering. I think that using skills and working as a collaborative team is just far more easier to do than to be successful by yourself. Because when you start by yourself, you have to put up great numbers and market and keep the operations on the train and keep your sanity. McMurtrie talks about it more eloquently than I. But the things I've learned, you partner with some people, sometimes it works, sometimes it doesn't. Is your asset class in favor? I started a value fund when value stopped working and became a growth market. Well, there's folks on the beach now who started growth funds. Maybe that yin is turning to yang here with ebb and flow of just how cyclical life is and then certainly in the market. I don't know. Of course, as a value guy, I always want to see value come to shine. Your cohost on your other pod-- [crosstalk] Bill: Yes. They also want to see value come to shine. Kyle: Value: After Hours, I love that, by the way. I listened to pretty much every episode. Bill: Well, thank you. Kyle: The veggies with Jake and listen-- [crosstalk] Bill: Jake's veggies this week were very good. I like a lot of his veggies, but I particularly like this week's. Kyle: What I would ask Jake, if I broke bread with him, I have not yet, I would like to. What I would ask him is, how on Earth does he have the time to find these veggies every week? It's good every week -- [crosstalk] Bill: I think at this stage, he has some external sources that are helping him. Kyle: Well, that's curation right there. Curation is the name of the game. What's that line? Good artists borrow, great artists steal, that kind of a thing. I butchered it, but the premise-- Bill: I'd be interested to see his inbox. I suspect he's got a number of pitches on this. Kyle: Yeah. And then, Toby's voice, of course. I'm a big fan. You've seen my Value: After Hours shirt. My wife, I bought the shirt and she's like, "You bought a shirt from a value nerd podcast?" I was like, "Yeah." She's like, "You're only going to wear it to the gym." I'm like, "Okay, that's fine." Bill: Well, we appreciate it. I think we sold nine and two were to you. Kyle: Yes, that's right. Bill: [laughs] Kyle: No, it's wildly enjoyable for someone like me. And so, thank you for the content. I've paid you a grand total of $0 for that. So, thank you-- [crosstalk] Bill: Well, it's been fun, man. It's wild to see-- We were out in LA at that Future Proof conference and there were only five people that listen to us, because they put us up against Gundlach. I'm not saying that we would have had tons of people, but I am saying that there are better drawers to have in the world than against Gundlach. Kyle: Well, and in LA, that's his home turf. Bill: Yeah, that's right. And he was wearing yellow. You got to see him. I wish that we could watch him. But the guys that did come were the guy's from, there at Seawolf now and it was Vince. I think it's Vince Daniels. I'm sorry if that's the wrong name and Porter Collins and Danny Moses. It's just super cool. Some of the inbounds that I get, I'm just like, "How are these people listening to me?" It's the guys that I used to read about or whatever. It's just been really nice. Kyle: You believed. You're vulnerable in a way that many are scared to be. And I think people saw that and I think people strikes a nerve. This game can be so hard. Bill: Yeah. Kyle: And Life can be so hard too. So, I think that's why one of the nine t-shirt purchasers. Bill: I appreciate it. I tell you what, man, these two years have been or three years, whatever the hell we are, it's just been nuts. And I don't even know which way is up and which way is down sometimes. I try to stay data focused and then you hear things like the Fed say, "Basically, we're going to throw everything into a recession, because we got to stop inflation." And I just don't know how to manage what I see currently, what I believe is maybe coming, and then how much separating a fear from reality and what reality may look like. And the other thing that I find really, really difficult about reading these tea leaves is the Fed has a dual mandate. You've got inflation and employment. Well, you can talk really, really hard on inflation when employments not cracking. So, how much of this is just peacocking and signaling? Obviously, raising the rates is not peacocking or signaling. That's real. But I don't know, man, I've never seen anything like this and I don't pretend to know a lot of history or whatever about it, but it's wild. Kyle: Even though, the great recession was only, what, 14, 15 years ago, these are vestiges, these are ripples and things because of how systemic that was. And going to the zero lower bound and QE, QE1, Twist, QE Infinity, all these things trace to 08. And so, now, we're trying to get off a lower bound, our demographics aren't great, Europe's demographics are worse, but ours aren't great and productivity. There's just so much. What is the neutral rate? Is there a neutral rate? Why 2% inflation? The amount of debt the government has is gargantuan and will never be paid back. It has to be inflated away and people don't want to talk about it like that. But it functionally does. Rates can go high, because government can afford it and the government can't afford to pay it back. So, unless we're just going to print ourselves into it, I don't want to get in trouble with the MMT people, but it just lacks basic understanding. Bill: I had a buddy who was like, "We need to send people money to help them-- Now that mortgages are higher. We need to help people afford their mortgage." I was like, "That is part of the issue that we're trying to fight right now." I don't know, man, they're hard questions. I'm glad it's not my job to figure them all out. But investing through it is very difficult. One of the things that gives me comfort with cable is, I don't think people are highly, likely to switch. One of the things that when I was doing diligence in Orion which was nice as business-to-business relationships are not something that people switch out of a lot. Kyle: Whimsical. There's not whimsical. Bill: Yeah. That's what I've tried to focus on are these relationships that endure and then let the rest of the chips fall where they may. Kyle: We have to decide what your objectives are. Is your objective to have a positive absolute return? Is it to preserve purchasing power? Is it to beat the market? Is it to have fun? I think you really need to be honest. Each entity needs to be honest with what they're doing, and how they're doing it, and what are the probabilistic spectrum of achieving that outcome or not. You turn on the TV or open Bloomberg or whatever, and everyone's trying to make money. Okay, well, that's great. 60/40, oh, 60/40, it's designed to do. Well, keep people in the game, and preserve some, and then 60/40 is the worst year on record, because stocks go down and bonds go down, because rates just went up by hundreds of percentage from what, because they started at zero. Now, you have a problem. What are you trying to do with 60/40? There's so many things that are just implicit and when we wake up and start investing that we forget to level set like, "What's the goal? What are we trying to do?" And that's something that we try to talk about internally on our team. But it's easy to get worked up into it about this name, or that name, or Ryan, or I went to this conference and learn this thing, and, okay, well, hang on. Why does that matter? Why does that matter? Does it matter? There's so much information. It's information overload. You've got to find a signal within the noise and just tune out all the noise. That's so hard. And Twitter's the worst, because now we're just sitting there calling each other dumb for thinking of cable for five years. What does that accomplish? I'm not smart enough to do cable. So, I'm glad that you're focused on that. So, you'll be my cable guy. Bill: I don't know that I am. If anyone can send me information on what fixed wireless looks like at maturity and what additional spectrum T-Mobile may need, that's what I'm looking for. So, that's my plea for help. Kyle: There you go. The problem was Cable Cowboy was such an incredible book that everyone wanted to go do it. Look, this is going to probably make a lot of people mad. It seems like the smartest people in the industry end up in TMT long short or at least, those people like to think they are the smartest. So, it becomes this halo around TMT. "Hey, money is green." You may get a lot of different ways. So, you've got to find something that makes sense for you. Cable works for you and I've done cabling a while. Bill: Yeah, media, I find very difficult, the actual infrastructure. I think generally where I'm more comfortable is hard assets, which is not a sexy thing. Kyle: Yeah. Bill: But the way my mind works, I just find it-- It's interesting. When I was studying physics, I was always really good in the earlier physics levels. And then when you'd get into stuff like magnetic fields and stuff that I couldn't see, that's where my brain had problems. I'm pretty good in the tangible world. Kyle: My brother's a computer science PhD and I couldn't even read his textbooks by the time he's a sophomore in college. But yeah, his brain just works that way, right? Bill: Yeah. Kyle: And mine doesn't. Bill: Yeah, that's right. Kyle: You've got to find what works for you. Just go find a sweet spot and go do it, right? Bill: Yeah. And I think what I'm learning more and more is defining what I don't know and what I'm not good at. It's really fine to just not have an opinion on things. Kyle: Yes. Although, being on Twitter, they would tell you you have to have an opinion on everything. But no, it's not true. Bill: I don't know. Kyle: It's not true. Bill: I'll tell you what. That was one that I got wrong that I thought that I knew. But I did pivot quick. So, I got that going for me. But man, I'm convinced that company is truly run by people that don't care about making money, which is really an odd thing to say. Kyle: It is. It is run by those people. Bill: I don't understand it. But whatever, I don't need to. There's plenty of other fish in the sea. Kyle: As I get older, I'm trying to listen more intently. And when people tell you that they're about something, sometimes, they're being brutally, bluntly honest. Sometimes, we see what we want to see. It's so easy or we see a version of colored by our own perception. So, a lot of people like the Twitter, I don't have an opinion, but on this Twitter, you have a legal background, right? Bill: Yeah, I mean, ish. I went to law school. I didn't practice. Kyle: You've got wife out of it. That's good. Bill: Yeah, no, no doubt. And she's way smarter than me and does have a legal background. With that stuff. I feel fairly confident on the contract law side. I'm just not confident enough to sign any high probability of an outcome to a legal case, because I just am somewhat aware of how wonky things can get. Kyle: Yeah. It's merger arb too. Merger arb is a great way to make money, but you just got to be wired a certain way. Bill: Yeah, I think if I wanted a merger or allocation, I'd probably just give it to Gabelli and be like, "I'll pay the fees. You guys do your thing. I know that you're doing it." Kyle: Gabelli, you want to talk about entrepreneurs within the financial industry? He doesn't get the praise that he deserves. I'll tell you what. I've been in random investment conferences and he walks in. He as a natural person walks into some like 7:30 AM meeting with some small cap and you're like, "This guy's been doing it for 50 years." I don't know if I'll get-- 7:30 AM meeting in 50 years, maybe I hope so. But he is intense in the best possible way. Bill: Yeah. One of my favorite parts of the Berkshire meeting this year was, I was just talking to him and Bob Rabadi. And I don't know, just like five years ago, I never would have imagined that would be me. Kyle: Yeah. Bill: I don't know. It's wild, man. The world is fun. Kyle: Berkshire's crazy. I turn around and be like, "Oh, there's Bill Ackman just sitting at the bar having a beer." Bill: Yeah, that's right. Yeah. Kyle: It always wigs me out when you got the board sitting all there and looking around, Gates, and Buffett, and all these folks, it's like, this is five- [crosstalk] Bill: Yes. Kyle: -some of the most influential people on the planet in one place at one time. Where's the designated survivor for the Berkshire board? Bill: Yes, I have the same fear and then I usually leave the building at noon and I'm like, "Okay, good." Actually, I don't normally go. Kyle: And then, Pabrai walks by 900 miles an hour. It's a fun. I haven't been as much recently, but I need to get back-- [crosstalk] Bill: Well, I hope they do another. The last one was quite fun. We'll see where it all goes. I don't know. Somebody's got to pick up the slack. So, hopefully, it'll be a number of people. Because I like-- [crosstalk] Kyle: It's you, Jake, and Toby. You already got-- [crosstalk] Bill: Yeah. Well, we'll see. I'm working on something. I don't know what it is yet, though, but we'll figure it out. Kyle: I'm excited for what it's going to be. Bill: Well, dude, I appreciate you coming by and thank you for imparting your wisdom. And I don't know, man, I'm hopeful that we help spread the word on CoVest, because I think that's a really cool idea and I think there's a lot of younger managers that could benefit from your experience and what it was trying to put together an SPV, and hopefully, it's a win-win-win for everyone. Kyle: Yeah, there's a lot of information on the website, and including on a business model, and cut a revenue to folks. We're trying to grow people's businesses. Ours included, shameless plug. But we're trying to grow people's profiles and businesses and do in a way that is profitable for everyone. So, one plus one equals three. That's the goal. The value community and the investment community, there's so many sharp people and there's a lot less ego than it would seem on Twitter. So, yeah, I have high hopes for industry long-term has a lot of really good, talented, caring people and you're one of them. So, thank you for letting me be here for-- [crosstalk] Bill: Well, I appreciate it, man, and take care. We'll talk soon. [Transcript provided by SpeechDocs Podcast Transcription]