Will Thomson - A Real Asset Discussion
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Bill: This episode features Will Thompson. Will runs the firm, Massif Capital, M-A-S-S-I-F Capital, which describes itself as a comprehensive solution to real asset investing. He and I met at a Manual of Ideas event in 2019. I thought he was super fascinating to speak to and given some of the interest in commodities. I thought that Will would be a great and timely guest. He's super thoughtful, he's got a really cool background, and he's got some really interesting takes on ESG, specifically, the environmental component, given that he is a real asset investor, think mining, think steel, think things that create 60% of global carbon emissions. He's got an interesting perspective and one that I don't hear discussed often. So, I hope that you all enjoy the conversation. I definitely did.
Will: We did. Yeah, we've met quite a few people at Manual of Ideas or at least I have. I think you have as well.
Bill: Yeah. It's a good organization. Shoutout to John.
Will: Absolutely.
Bill: I try to give John some love whenever I can.
Will: I think that makes sense, makes sense. I try to talk with them as often as I can as well.
Bill: Sometimes, I wonder how good his idea flow is. If I ever talk to him about something and he doesn't even give me a flinch, I'm like, "That's okay. I know that how much you hear."
Will: Yeah. I think he must get a lot of ideas passed to him. I often wonder if any, I mean, we present a lot at their conferences. I always wonder if anyone follows the [laughs] any of the things we suggest. It's interesting.
Bill: Well, Grants, too. You have been featured in a number of times and spoke at the conference recently, right?
Will: I did this year. It was great, it was like the highlight of my year. I'd never been to the conference, I'd never met Jim, but I'd been on his podcast. Frequent reader. Was not, as he said, a fully paid-up subscriber until this year. I sorted of bit the bullet. Finally, I got tired of getting slipped copies at random times and spoke about our firm's outlook on the energy transition. So, it was good.
Bill: When you and I talked at Manual of Ideas, you told me a little bit about your background, which is definitely nonconventional or unconventional, I guess. Do you want to tell people a little bit about what you did to get here?
Will: Yeah, sure. So, father worked in finance. I was always around finance. Started on Wall Street as an intern, 16 was the youngest intern on Wall Street supposedly for a while in investment banking, decided I didn't want to be an investment banker at 21 just as they made me an offer, and path has diverged from the traditional ever since. Went off to Asia for a year, just traveled around, came home, worked for a private equity firm, that was really just one guy's money just getting deployed however, he felt like it would make sense. Then went to grad school and study political risk and specifically political risk associated with natural resource projects in emerging markets.
Bill: How'd you choose that?
Will: Did not want to go and get an MBA because that's what everyone else was doing at the time.
Bill: Huh.
Bill: One of the things that this private equity firm if you will that I was working for one may look at was student lending. So, this was 2008, 2009, and I am by no means an expert on student lending anymore, but I spent a year studying the industry, and then some policy came down pipeline and the opportunity we thought we would pursue just evaporate. I was fascinated that the government passed a regulation and this opportunity just disappeared. So, I was in Boston at the time, I went over to Harvard, just started talking with some professors there about some other examples of this type of thing. Then he shut down the private equity firm. So, I said, "Well, I better go back to graduate school as people sometimes do when they get fired."
Bill: [laughs]
Will: My choices were an MBA or something off the beaten track, and I proposed to a professor writing this Master's thesis, and he said, "Great. Apply for this program." I applied for the program and that's what happened.
Bill: That's cool.
Will: Yeah. Then, actually while in grad school, I wrote a bunch of papers on Afghanistan, basically, arguing that looking at Afghanistan as an us versus them as we often do in conflicts. Good guys versus bad guys was the wrong way to think about them because the Taliban was multifaceted group with lots of different agendas. So, really, we were fighting in Afghanistan for market share versus other people. General read it, thought it was interesting and invited me out for a job. So, I went out to Afghanistan for nine months and worked on this general staff.
Bill: That's awesome.
Will: Came home, then got an offer to work at a Lloyd's of London insurance syndicate that was starting up operations in New York writing political risk insurance policies. Helped build that business up and then said, I want to go off on my own and started Massif Capital in the grand scheme of things. No experience running a hedge fund, no experience managing outside money, and $250,000 of my own capital, and that was it. I got told multiple times that I was crazy and that wouldn't work. We're five years in. So, I think that's a great run thus far but we got a long way to go still.
Bill: Yeah.
Will: That's my [crosstalk] background.
Bill: Well, I think that signs are pointing upward for you.
Will: Hopefully. [laughs]
Bill: You seem to be a guy that creates opportunities for himself. So, that's a good thing. Okay. So, what is Massif specialize in or what would you say your view of the world is?
Will: When I was working for the Lloyd's Syndicate, we focused exclusively almost on emerging markets and natural resources. Of course, my political risk background also focused on natural resources, and my time in Afghanistan focused on a lot of economic development, which for them was natural resources based. So, when I started Massif Capital, the idea was that we would focus on the businesses that I had been writing insurance policies for, which were natural resources companies and rather than just participate in the downside, which in insurance is what you do. We would participate in the upside. So, we invest in energy materials and industrials, which is our understanding of the real asset universe. Energy is everything from oil and natural gas to renewables to electricity. Materials is everything from mining, which is our bread and butter, to agriculture, to we've invested in salmon farmers, and then industrials is a whole mess of things that is quite confused as a category.
Bill: Yeah. Will you get into infrastructure at all?
Will: Yeah. We've done some infrastructure at times, mostly energy infrastructure. We've looked at some road infrastructure companies in Brazil and Italy, dodged a bullet on one in Italy, Venezia, I think is what it was. That was a couple of years ago. So, we've done a little bit of infrastructure. It's definitely a real asset that we like. It's really hard to get access to in public equities, at least in my opinion. It's usually a little expensive, it trades a lot on its dividend, and the dividends have been mediocre as of late.
Bill: Makes sense.
Will: Yeah.
Bill: Perception and safety and then all of a sudden it evaporates or something like that. I could see that.
Will: Yeah. You really can't charge very much. Toll roads is a big one and then the other thing is that, I will say that that is one area where the political risk has shown it can be nasty at times. You can't move the asset, you can't pick it up, it requires no expertise to run a toll road. So, the states tend to renegotiate these public private partnerships that come into play to build the asset.
Bill: When I said makes sense, it's one of those things that it feels, this has just got that like, okay, when its running well, people underwrite it as if it's always going to run well, and then that negative risk can come out, and then you're just like, "Oh, there goes the return stream."
Will: I think that with everything we do, the cyclicality produces that outcome. But infrastructure might be one of the more pernicious places for it. But that straight line extrapolation of the future, it happens with absolutely every industry we look at, that almost could be a way of defining the industries we look at.
Bill: Yeah. So, you were not in the never sell crowd. Suffice it to say.
Will: No, I'm not. Actually, I'm not sure I really believe that there is any never sell investments. I'm sure that we can pull up the Manual of Ideas crowd, I'm sure we could have this debate, but I would almost argue that everyone is a trader, but just on different timelines, and that there is no such thing as a buy and hold forever investment.
Bill: Well, we'll see if future guests disagree. I tend to agree with you but I have sold some things that I wish that I didn't sell in retrospect. So, that's how life goes.
Will: Yeah. Well, we've all been there before.
Bill: Yeah.
Will: That sell decision is tough. My father, who used to run a hedge fund, he always told me that you can't make a good sell decision because you either sell too early in which case you regret selling or you sell too late in which case you should have sold earlier and you regret that.
Bill: [laughs]
Will: So, any sell is going to be negative on your emotional and psychological wellbeing.
Bill: I like that. That's a funny way to look at it. I'm going to try to dispose of that from my mind, though, because otherwise I will just sit here and beat myself up.
Will: Yeah. Well, I excel at that. [laughs]
Bill: Well, you sent me some things to review as we were prepping for what we're going to talk about, and one of the things that struck me was your views on ESG, and I was hoping that I can help guide you through a conversation to lay out what you want to say on it because the first sentence, or first paragraph, or whatever came through my head. I don't know if it's exactly what you wrote. But in my head it read, there's the perception of ESG in some of these companies but if they're outsourcing all of their mining to child labor and that company is off balance sheet, that's not really ESG, and where we might want to focus is in the company that's doing the mining to have a true impact on the globe. When I read it I thought, "Man, that's smart." Is that a fair characterization of what I read or did I make that up?
Will: No, no, I think that's a pretty fair characterization. The way I often think about it is, I think about that TV show, I don't know if it still exists, but there was that TV show, The Biggest Loser where they tried to get overweight people to work out and eat right. I always think about it like ESG right now sells you a bunch of NFL running backs and says that, there's improvement that can be made there in terms of their athleticism and their weight or something. You're like, "Well, um, so." If I'm on The Biggest Loser, I'm going to pick the big fat guy who's got a lot of problems, and all I need to do is get him to eat healthy or stop eating McDonald's, and he's going to drop weight, and I'm going to be the guy who coached the biggest loser, rather than go after people who have no problem, you should try and invest capital in people who have a problem and are trying to solve that problem. So, that's people who have carbon emissions, rather than people in the case of climate change for example, who have no carbon emissions.
I think based on all the research we've done, most ESG products are bought primarily because people think there's going to be a positive environmental impact associated with their investment. But if you're investment goes to Apple, or Facebook, or any number of these companies that sit quite high on the list of ESG allocations, just don't really have a carbon footprint. They don't really have a negative impact unless they can't really have a positive impact either. Especially, companies that make no effort to like, Apple for instance. It doesn't do anything or innovate anything that has a positive environmental impact. So, it's just a non-variable.
Bill: Well, might they argue that they're investing in-- I don't follow Apple's ESG stuff, but just hypothetically, might they say like, "Well, our campus is self-sustaining and look at what an example we're setting."
Will: Yeah, they absolutely do and I think that's accurate and there's something to that. But we calculated what their carbon emissions were in 2019 and it was a half of 1% of US emissions, which is to say, it falls inside the margin of error on measurements for the nation's carbon emissions. So, whether they decarbonize or not, whether they set a good example or not, it's neither here nor there. Admittedly, setting a good example, it's hard to measure the impact of, but that they decarbonize isn't going to make a difference to say climate change.
Bill: Well, so, I guess if you were the king of ESG allocation, or investing, or whatever where would you focus people's attention on how to have the biggest impact when they're thinking about ESG or reducing carbon footprints?
Will: I do think it's a really hard problem for someone like BlackRock, with all that money, whatever they got $9 trillion now, I don't really know what someone like that does. They've got a problem that I myself don't want. I don't want to have $9 trillion. As far as I'm concerned, they don't invest, they just buy everything. I'm sure they-- But I think that in terms of individuals, you want to allocate your portfolio to a mix of companies that enable the transition to a low carbon economy. If the environment is your primary concern within this ESG framework, you want to allocate to firm's that can enable the transition with the product they produce. So, that would be guys who mined copper, guys who produce wind turbines, solar panels, renewable diesel fuels, all sorts of different enablers of a low carbon economy.
Then you want to invest in companies that are transitioning. So, that would be a steel producer, who we need steel. It's very carbon intensive but there are ways to start to approach a zero-carbon steel. So, there are steel companies who are focused on trying to shift their business models. So, you want to be invested in a mix of those enablers and transitioners at least that's the way we look at it.
Bill: Is it possible to view BP's always got this beyond petroleum marketing-- I shouldn't call it a gimmick. That almost came out and then it did but I digress. Is it possible to have an oil company that is ESG or should they just be off limits?
Will: I think we absolutely need oil come-- Look, 80% of our energy globally still comes from hydrocarbons or coal. That's not going to change anytime soon. I know everyone wants it to and I know that everyone's out there saying 2030 now, we've pushed from 2050 to 2030 quite quickly. But the fact of the matter is that the infrastructure associated with the energy system and the uses for energy, which are just endless. That transition is going to take much longer than people think and much longer than a lot of these nice sounding plans that we see government's proposing. So, we still need oil companies. More importantly, I think the transition to a low carbon economy is in essence a capital allocation question and is in essence, the industrial investment activity the world has ever seen. Everything needs to change because the foundation of everything, energy needs to change. So, in order to do that, your economy still needs to run. It still needs to run well. Until, alternative assets that can generate energy exist, we still need oil. So, oil is critical to the transition because it will fuel the economy that can transition.
The other thing is that, one of the biggest problems we have is that there're about 2 billion people on earth that still burns solid waste and solid fuel. That's wood, charcoal, etc., for heating, for energy, for food, etc., and those people all want to improve their quality of life. Improving quality of life tends to reduce carbon intensive. So, development is critical to the transition and that doesn't occur without oil and natural gas either. We think investing in companies like Equinor, like BP although we are skeptical that BP can manage the transition as quickly as they claim they're going to make sense in a lot of portfolios. But you've got to be selective. We selected Equinor. Equinor is big in offshore wind, which leverages their offshore oil and natural gas experience, it complements their skill set nicely and so it makes sense for them. BP has taken in all of the above strategy and is doing a little bit of everything. I'm a little more skeptical of that than I am a targeted approach from the oil company perspective.
Bill: BP seems as somebody who's just an observer, they almost have the same problem that a government has in that they're so large and so sprawling, that delivering a happy message is maybe more important than actually delivering by 2030. So, if we say we're going to transition by 2030 and then they come out and they say, actually, it's going to be 2035, do investors actually really care? I would argue probably not as long as they can show that there's progress being made. I mean that's what I think the truth is so.
Will: Yeah. I don't think that's cynical or anything. I think you're spot on. I think that you can show progress is not only the most important thing but it's going to be the most important thing for quite a while, just because the transition is going to take so much longer than people think.
Bill: I don't mean to be like a neophyte when I ask this. But you said that now twice. Why will it take so long? I understand there's current and infrastructure, but if somebody coming into this is thinking, "Well, look at all the Tesla's being sold and why can't we transition quickly? We should be able to." What is their brain not fully appreciating?
Will: Well, so, let's start with what the "solution set" at the moment is and its renewables and EVs. Now, with renewables you've got increased material intensity, increased capital intensity, and you need to find places to put them all too, and there's literally a land scarcity issue with regards to renewables if you want to transition your entire grid. So, you've got a huge build problem in terms of getting people to accept, putting a wind turbine behind their house or whatnot. Just like you'd have with an oil refinery or something. So, the footprint on oil refineries is really quite small in the grand scheme of things.
Bill: Yeah.
Will: So, with renewables you have a time to build problem, you have a capital problem, you also have a materials problem just building enough of these things fast enough. So, for instance, transitioning the US electrical grid by 2035, I think is what the Biden goal is. Just the number of wind turbines, the number of solar panels, etc., you're just talking about consumption levels that don't have associated production. And then perhaps even more pressing in regards to EVs is sourcing the material for the batteries. The batteries are incredibly material intensive and incredibly energy inefficient in comparison to oil and natural gas. Mines take forever to build. A copper mine takes five to 10 years to build and that's after a five-to-10-year process of finding it and permitting it. So, we don't have anywhere close to enough copper production to build all the batteries we need.
We had a blog post, let me see here, give you some stats. This is from our work. So, someone can critique this if they want. But years of production, so, in order to transition all the vehicles globally, we need two years of total copper production or 6% of global reserves to do that. But of course, you also have batteries for stationary storage. When you start to include those because renewables have intermittency, you need 22 years of annual copper production just for those two sources or use cases.
Bill: Just taking a step back real quick. So, if we transition all of the autos, you said 6%?
Will: Yes. 6% of global copper reserves [crosstalk] batteries.
Bill: And those of us that are getting charged are being charged predominantly from natural gas or coal plants, correct?
Will: Yeah, probably. In China, for example, that's the largest market at the moment for EVs. It'll all be natural gas, coal, and a couple of other things.
Bill: And then, if we take a step back and we say, "Okay, well, we don't want to charge it with natural gas and coal, we want to charge it with some of alternative energy." We're going to need a battery to store it, because alternative energy has peaks and troughs and you need to have the baseload covered, and for that battery storage, you need 22%.
Will: No, 22 years.
Bill: 22 years. I'm sorry. Yeah.
Will: Gotcha.
Bill: Yeah.
Will: Lithium, 706 years.
Bill: Whoa.
Will: So, this is a shift-- This energy transition, the phraseology I find problematic because it is a transition, but it’s a transition from one material intensive energy source to another material intensive energy source. It's just different. We get rid of carbon emissions, but we create these other environmental challenges. It's not like mining. I've been to quite a few mines. They are not environmentally friendly. You got acid running all over the place, you got a giant hole in the ground, you clear cut acres and acres of land to dig a giant hole. We're not improving our environmental footprint by shifting to batteries. We're just changing our environmental impact.
Bill: Hmm. Takes a different spin on climate change.
Will: Yeah. We go from carbon emissions issue to a biodiversity issue and a water issue. Yeah, there's no environmentally impact free lunch here.
Bill: I haven't thought of it as a biodiversity issue. I like how you said that. That's because I don't spend a ton of time thinking about this, but that makes a ton of sense. And if you're pulling all this stuff out of the ground, bound to have some consequence elsewhere, right?
Will: Yeah. Depending on who who's doing the pulling out of the ground if you will, it can be more or less impactful. We had looked at a cobalt asset in Indonesia I think two years ago called Ramu and it was run by a Chinese firm. We chose not to invest in it for a whole host of reasons. But one of the reasons was, we were skeptical of their environmental management. Lo and behold, about a month after we decided to pass on it, they had a minor tailing dam break and this toxic waste just poured into the Pacific Ocean. So, again it's not impact free. It's just a very different impact. Frankly, it's an impact that could be as significant in the fullness of time as climate change. After all, these things are all interconnected in ways that are poorly understood.
Bill: Yeah. It's so fascinating because I have friends and people that I talk to and I don't even mean this in the wrong way. I think it's factual what I'm about to say, but my perception could be wrong that they're so convinced that going to an EV for instance is like the answer and is solving a problem, and might we be approaching a scenario where we're solving one problem and creating another one that could potentially be even larger or whatever. I don't even know how to have that conversation because it's not my expertise but it's what I've enjoyed reading your material.
Will: Yeah. The other part about this, what started this whole as your question about what people don't understand about this transition, why it'll take longer. People think renewables and EVs as you said but less than 10% of global emissions come from cars. Less than 40% come from cars and the electricity system. So, burning coal and things like that. You deal with cars, and you deal with the electricity system, and you've only addressed maybe 40% of emissions. [crosstalk]
Bill: Better than nothing though.
Will: Yeah. Oh, no doubt.
Bill: If I lost 40% of my excess weight, doctors might say, "I'm healthy."
Will: Yeah. I don't deny it. We wholeheartedly support the building of renewables, and EVs, and new Ford EV truck is on my list of cars, I think they're really [crosstalk]
Bill: Yeah, dude. That thing's pretty sweet.
Will: Oh, yeah. It looks very cool. It's got all useful bells and whistles for someone who lives in a city and has no need for a truck-- [crosstalk].
Bill: Well, everyone has a need for a truck that goes zero to 60 in three seconds.
Will: Of course, naturally.
Bill: The only thing I don't understand, man is, I don't understand why they don't just make these cars look like cars.
Will: Man, I don't get that one either. It drives me nuts looking at the front grille of a Tesla how it's like flat?
Bill: Yeah.
Will: It drives me nuts. I'm like, "it doesn't really look like a car." I don't know. It's not attractive.
Bill: I'm on Instagram. I'm always looking at cars and stuff and I was looking at the new Mercedes. The inside looks like an S class, and then I look at the outside and I'm like, "Why didn't you guys just make it an S class?"
Will: Yeah. I think-- [crosstalk]
Bill: But we've digressed.
Will: Yeah.
Bill: I just don't get that. They're like, "Okay, it's electrical make it nerdy looking." All right, whatever.
Will: Yeah. I will not be buying a cyber truck though. That's for sure.
Bill: No, I won't either. Although, I'll tell you what that the EV Hummer looks pretty sweet.
Will: Yeah, that does look cool and it can turn the tires and go sideways.
Bill: Yeah.
Will: I don't know what I'll do with that but it looks cool. [laughs]
Bill: I think that the auto transition is just going to curve because people are going to experience how much better an EV performs and they're just going to be like, "All right, I want to drive something that pins me to the back of my seat more than I really care about this."
Will: I think you're right. You look back at the history of energy transitions and first of all there hasn't really ever been an energy transition like the one we're proposing now. All historical transitions have been additive. We use more wood for energy now than we ever have, we use more coal than we ever have, we use more oil, natural gas, etc. So, we just add. But those transitions all occurred because of technology, if you will, coal, oil came on the scene and it was just better than everything else. Breakthrough technology I think is how this transition occurs in the end or it doesn't occur, probably. Because otherwise, it's got to be top-down government driven and I'll admit some skepticism whether that's going to work. But I think you're right. People will buy EVs because it's a better call.
Bill: Yeah.
Will: Or, they won't buy.
Bill: Yeah. I think my dad used to sell golf carts and the other thing that I learned that I do think applies here is, I'm going to mess this up because it's been a while since he sold them. But I think in an electric cart, there were 28 moving parts in a cart, and in a gas cart, there's 180. So, when he would sell a gas cart, he'd be like, "Oh, I've got a maintenance stream forever." When he'd sell an electric cart, it would be like, maybe a solenoid would break or batteries would need to be replaced but the maintenance stream was not very good on that.
Will: Look, we don't actually invest in car companies but my understanding is that the cars have significantly fewer parts.
Bill: Yeah. So, I get that why people will be like, "Okay, this is superior tech. That's why I'm going to buy it." But I don't buy that, I don't know. I agree with you. I think if it's for environmental reasons, it's going to have to be from the top down and I too am skeptical on whether or not top-down solutions are going to be effective.
Will: Yeah. In the end, we can care about the environment and some people can take that concern to a significant level that's all encompassing for their lives, but for us with people with kids, people running businesses, etc., it's hard for that global vague concern to rise to the level that we actually make specific economic decisions around, at least, I think it is.
Bill: So, you've got a much better sense of how the energy industry impacts different countries. One thing that has bothered me viscerally and I haven't put data to my thoughts, but I'm pretty sure the right is, when I hear this commentary on getting off oil or getting off coal or whatever, I think about the countries that haven't come up yet, and it feels like we're pulling a ladder up behind us. How would it be possible to transition the world off of what we're currently on while also helping that you're talking about people that are still burning solid waste. Don't we need to be invested in what we're currently invested in order to allow the globe to have a greater quality of life?
Will: Yeah, I think so. At COP26 this year in Glasgow, the annual or I don't know if its annual, but the big climate gathering if you will that occurs, it's sponsored by the UN every year. The Nigerian Prime Minister or oil minister, I don't remember which his comment was, look for you guys in the United States, you have one energy transition to go through, we have to do two leaps to get to where you are. So, we're engaged in multiple energy transitions. This challenge represents not only a scientific and political dilemma, but there's an ethical and moral one as well, which I think is what you're getting at. Now, the citizens of the world's least developed countries are not only most at risk from climate change, but also are the people who have aspirations for economic prosperity and growth that we've only figured out how to do via a resource intensive industrialization process.
So, no one's figured out a development model that isn't resource intensive, and industrialization, and frankly polluted. If someone comes up with one, there's a path forward. But otherwise, you develop steel industry, you develop a mining industry, you develop railroads, and then you develop a car industry, and then you get an airline, and it goes like that. All of these things are improvements to human health and prosperity, but there are environmental tradeoffs, and that we need to find a way to balance that tradeoff, human health in prosperity versus environmental impact. Today, I don't think we found an appropriate trade off. The EV renewable path does not seem like the appropriate path for a lot of those countries.
Bill: Yeah. It seems like their only advantage in the conversation that we're having is that they don't have maybe some of the legacy infrastructure that we do.
Will: Yeah.
Bill: But that seems like a small consolation prize.
Will: I would tend to agree. Yeah, it's pretty small.
Bill: So, just circling back to something that we were talking about a little bit earlier and I'm sorry to jump around a little but you mentioned that EVs account for 6% or for some reason I have 6% on the head that keeps coming back.
Will: Yes. The cars, automobiles, passenger vehicles, they're about 6% for global emissions.
Bill: And then the remaining 34% was--
Will: It's electricity and that's 40% of emissions, give or take.
Bill: Okay. That leaves us with 60%.
Will: Yeah.
Bill: So, what do we do to attack that 60% or what as investors do you think we should be thinking about thematically, where to be looking for? Because this is pretty clearly something that's going to be a very long-term trend, right?
Will: Yeah. I think that there's great opportunity in these other emissions. One of the things that I'm always struck by is how the term 'technological innovation' everyone always thinks of basically consumer electronics. You think technological innovation, you think consumer-- [crosstalk]
Bill: Yeah. How fast is my internet connection and my phone?
Will: Yeah. This other 60% of the world's emissions come from areas and industries, where there's going to be a lot of hard science, technological innovation. New processes, new materials, and these are steel companies, these are aluminum companies, the entire chemical industry is based on hydrocarbons base, basically. Natural gas and oil products are basically the feedstock for all chemicals. Pharmaceutical Industry is a giant consumer of petrochemicals as precursors for the drugs we all take. So, any of these industries can be part of the transition and will play an important role in the energy transition. We focus on those heavier industries like the steel industry, like the chemical industry, we think the chemical industry in particular is quite creative, quite forward looking. They spent a lot of money on R&D. There are a lot of interesting changes occurring in how we use chemicals, how we produce chemicals, and chemicals are in absolutely everything we consume.
So, these old economy industries are going to experience over the next 10, 20, 30 years rates of change in parts of their businesses that we would tend to associate with consumer electronics as they swap over the use of one petrochemical derived product for a new chemical that is derived from some other process that doesn't involve carbon emissions, doesn't involve oil and natural gas as a precursor. I think at least from our perspective, the European chemical companies are ahead of the curve in a lot of that transition. But they're spending a lot of money, investing in a lot of R&D and that should we think produce a lot of innovation that's well worth investing in.
Bill: You know what's interesting about that is they are probably today and I don't know this to be true, but somewhat like I hear European and chemical company and all I think is like, no one wants to touch it, no one wants to cover it, if they're investing, their earnings probably look like crap. They haven't grown in forever because they're probably cannibalizing some, you know, what's going on? If out of that comes some growth engine, wouldn't that be an interesting outcome?
Will: Yeah. We tend to look at it that way as well. I think there are a couple of chemical companies who have made a splash with some battery related chemicals and battery related materials, and they can be a little pricey because everything related to batteries these days is pricey. But generally speaking that European complex wouldn't call bombed out, but it does not attract the attention that we think it warrants at least from a fundamental criticality to the economy combined with the changes that they're going to see and engage in over the next 20 years.
Bill: It's insanely unsexy.
Will: Oh, very. Everything we do is unsexy. I think it's sexy. I don't know what sexier than an offshore oil rig. But-- [crosstalk]
Bill: [laughs] There're a couple of things.
Will: There are a couple things. Okay.
Bill: I mean, very few but a couple. [crosstalk] What's interesting though is, I hear that and I get intrigued because I don't know, I was just reading by-- Do you know Drew Dixon? Albert Bridge? He's great. He's a great guy. I actually think you and him should talk because he covered a lot of Europe for a while and I think I'll intro you guys after this. But he's been studying growth versus value, US versus Europe, and European value is just like not at all where you want to be, and I don't know if these industrials, I'm not saying it's not where you want to be prospectively, I'm saying the multiples would imply it's where people don't want to be today.
Will: Yeah.
Bill: And if I think about, like, where has everybody made a ton of money and where does talent want to go to, I don't think like it screams European industrial R&D. But I can totally see that setting up 20 years from now, people being like, "How did everybody miss this?"
Will: Yeah. That's our bet to a degree. I'll be completely transparent. We don't have any chemical companies in the portfolio right now. So, we like the overall thesis. We haven't found that company that we want to be invested in for the long term. But there's a lot of interesting things going on and just a lot of creative people that are thinking about the future and the next innovation that's going to change the bottom line of the company. When you combine businesses that haven't really changed in, let's call 50 to 75 years with a management team that says, "We need to change now and we're going to invest a lot in R&D to make those changes come up with innovations that drive that change," I think there's a great potential.
Bill: Yeah. The tough thing today when you're looking at it is you have this growth engine underneath something that's probably getting cannibalized. My buddy, Chaz refers to it as like "the duck in a pond," where the legs are swimming real fast and you can't really see them right and above this [crosstalk] like much.
Will: That's a huge problem. We run into it all the time. Work we've done looking at companies like Ørsted. So, Ørsted was the Danish national oil company, and then they dropped all their oil and transitioned to offshore wind. So, looking at companies who already made the transition of which there aren't that many, so, we don't have a lot of case studies. But what we found is that the market tends to take note when the alternative revenue stream, let's say, hits 30%, and then when it hits 50%, it becomes the primary consideration. So, those two flags in the ground if you will, 30% and 50% not that we're trying to time things to the day perspective or something like that or in a very deliberate way. But just from a catalyst perspective, those two lines in the sand seem to be quite significant for the market.
Bill: Yeah, well, it makes sense to know that. Going in when it's a 10% having a high degree of confidence that the markets not going to care until 30 is a great way to be dead money.
Will: Yes.
Bill: I don't think anybody enjoys that.
Will: No. Yeah, the potential loss of capital appreciation from being dead money and value investment for too long, it's a quick way to lose your job as a professional money manager in my opinion.
Bill: Yeah. No, I think that's objectively true. Man, something that I'm seeing throughout the complex and Andrew Walker has been talking about this, too, is these cyclicals on current cash flows looks so cheap. There are a few things truer I think then you don't want to buy cyclicals when they look cheap. But this time may be different.
Will: [laughs]
Bill: And those are famous last words, but I was curious to hear your thoughts on that because I think there's a couple areas that you play in that are maybe benefiting or setting up in that--
Will: Yeah. So, I tend to agree with you. You want to buy cyclicals probably when they look expensive.
Bill: Yeah, like, infinite undefined super high P/Es or whatever, right?
Will: Yeah. I think there are a couple of commodities within the electricity space if you will, like copper, probably lithium that you can get pure exposure to. So, one of the challenges with a lot of commodities is getting pure exposure in equity markets. So, there are plenty of people who just mined copper, there are plenty of people who just mined lithium, nobody just mines cobalt. You need to be invested in a copper miner to get cobalt. So, that creates a little bit of messiness. But there are a couple of commodities and I think lithium and copper would be two that I would highlight as slightly more interesting, although copper I'd be a little worried about right now that we're probably going to see a step change in what we think of as the long-term cost of production.
One of the things to think about is when you think about, especially mining, and that's a lot of what we're talking about. But we could talk about Ag and fertilizers and things, too. But when you think about mining at least there's this spectrum of minerals that either are highly complex to mine, but you don't need to mine a lot of them, so, diamonds, very complex to mine, but you really don't need a lot of diamonds to mine it. So, you don't need to build a lot of infrastructure to commodities like iron ore, where it's very easy to mine, it's not complicated at all, you're basically just scraping red dirt off the ground but the infrastructure associated with getting it to market is quite dramatic.
In Australia, they build railroads, ports, etc., to get the iron ore out of country. But the mining of it is just digging up red dirt. What's happening is some of these commodities are shifting in that spectrum. So, copper being the perfect example. Copper used to be able to mine with modest geological and mining technicality and modest infrastructure. Now, what's happening is you're really shifting quite dramatically towards it being extremely complex to mine it and it requiring a lot of infrastructure, which means there's a step change in the cost of production, which means there needs to be a step change in the price which these miner's get. I wouldn't call it a onetime inflation offset if you will, but it's like a onetime jump in price. For the commodities that are going to experience a fundamental change in their use case, I think you're probably still okay but you may experience volatility.
Bill: Yeah. Well and I think right now the perception at least among generalists is like, how much of this is supply chain. how much of this is-- I see a lot of, well, I'm seeing more I should say, the theses of like, the step change is coming, a lot of energy is governments are artificially restricting supply, and it's really hard to parse like, how much of this is reality versus short term? By short term, let's call it two to three years COVID hangover type stuff makes it very noisy.
Will: Yeah, it makes it very noisy. So, we do not invest in commodities where we only have a macro thesis. Frankly, we want the macro thesis to be nothing more than a tailwind. I think that's one of the critical mistakes that I think a lot of generalists make is they come up with what they think is a great thesis. But when you boil it down, it's really a macro thesis, which really makes it a macro investment. Some people are good at that. Don't get me wrong. I myself am terrible at macro, like, style investments. But there are other reasons why a mining company or an oil and natural gas company might move besides the price of the commodity. The commodity price-- you should try and find companies for which there are other catalysts than commodity price because in the end is what the macro thesis ends up being about the commodity price. There are plenty of those, but they require more work than say investing in Rio Tinto.
Rio Tinto is just going to trade within commodity price. So, you need to get your macro cycle right. That's really hard to do. Whereas a junior miner that's developing an asset, you have development risk. Then once the development risk has played out, you get a pop. Mining firms trade more like biotech firms to be perfectly frank. They get a pop when they get a discovery then they sell off just like a biotech firm does when it's going through the FDA pipeline. Then, when the drug hits and it's through the pipeline, it spikes again. Mining firms and most commodity producers trade in that same cycle where there's a period of time where you are quite literally de-risking the asset and it is either trading sideways or trading down. So, that's what we tried to do and by focusing on those types of companies, we avoid having to base it all on a macro thesis or a commodity price thesis.
Bill: That makes sense. So, in theory you wait until they prove out the asset, get that initial pop, and then you're watching them de-risk the asset and while that's going on, maybe equities getting a little bit impatient or they're going to-- It's a different type of investor base that’s turning over.
Will: Yeah, oftentimes, when they make a discovery and that initial pop then sells off afterwards, because you get a lot bunch of people leaving. So, that's tends to be when we invest.
Bill: Yeah. Interesting.
Will: So, yeah. I think generalists and the natural resource space are risky. I would specifically say thesis around the majors. If you see someone proposing a thesis around Rio Tinto or any of the majors, those I tend to find to be the weakest theses in regards to natural resources.
Bill: Interesting. Makes sense to me. It's where my brain would go and I would be bound to get crushed in, I think-- [crosstalk]
Will: It's nice and sexy. For some reason, getting that great macro thesis, there's something cool about it. But boy, is it fricking hard.
Bill: Yeah. Well, I think that there is the perception of safety in a major as opposed to a minor or a junior. But what is probably true is the perception is out of ignorance and not out of true safety if that makes sense.
Will: Yeah, there's some truth to that for sure. [laughs]
Bill: I think when we talked, I think we talked about Barrick Gold. I think he told me something similar just like you don’t want. I think you had a real reason to not like it at that time and I had a half-baked concoct reason to maybe like it at that time. I think you're right and I was wrong.
Will: Well, I don't know. I don't remember when this was because at one point we did invest in Barrick. It got bombed out with gold and was trading at $10 a share.
Bill: I think we talked in 2019.
Will: Oh, you are right.
Bill: I think it was late 2019.
Will: Yeah, we got out of it by then.
Bill: Yeah.
Will: So, it got bombed out, traded down to 10. They brought in John Thornton.
Bill: Yeah, the new CEO, right?
Will: I thought that guy was brilliant. Everybody else in the mining industry hated him because he wasn't a mining guy. He gave everyone, what is that book called? He gave everyone on the management team-- What's the book about the great management teams?
Bill: Is it Good To Great?
Will: Maybe.
Bill: Are The Outsiders?
Will: The Outsiders.
Bill: Okay.
Will: He made everyone in the company-- he bought up 5,000 copies of The Outsiders and just handed them out to everyone in the company and said, "This is what we're going to be." Then they merged with Randgold and Mark Bristow, who's brilliant. But it then popped like 30 and at 30, you took the gold price, spot price plus 25% or something, and that was the future discounted cash flow value. It was trading at that future discounted cash flow value and we said, "Okay, we've had our 10 to 30 move, we're out," because this is just going to trade with gold now.
Bill: Can we talk about you exiting uranium despite uranium Twitter being all mad at you?
Will: Yeah, if you like. It's a very similar thesis.
Bill: Well, why don't we set the stage for people that aren't deep in the uranium thesis?
Will: Yeah.
Bill: What's the best way to describe this? Uranium mines are very, very hard to get permitted. Is that fair?
Will: Well, any mine is hard to get permitted these days. But uranium mines are hard to get permitted and uranium has been a historically very volatile asset, commodity with a very limited consumer base, which niche metals just tend to be roller coaster rides. They're fun but they're roller coasters. So, uranium has always been a roller coaster.
Bill: Something unique about the contracts too, to the--
Will: The contracts really, it represents about 5% of the operating costs for most plants. If it doubles, it doesn't really make a huge difference to the power plant operators and things of that nature is that sort of favorable. The contracts are highly opaque, nobody sees it. It all occurs behind closed doors if you will. It doesn't trade publicly like you and I can't go out and buy uranium. Cameco, for example, wouldn't sell it to us. We don't have the right permits. So, only certain people can buy it and one of the bigger issues recently or over the last decade has been that as Russia has gotten rid of their nukes, they've taken all their highly enriched uranium, watered it down basically for power plant usage, and there's just been an endless amount of secondary uranium available on the markets for about a decade. So, it just crushed the price for a long time.
Bill: Yeah. If you look at the long-term chart, it ripped in what like 2010 or something like that, went to over hundred, and then it just got completely bombed out.
Will: Yeah.
Bill: So, I followed uranium Twitter for a little while and it seemed like everybody was saying, "Okay, this is the next spike, this is the next spike," and you had initiated a position in what Kazatomprom, is that how you say it?
Will: Yeah. So, backup, I've followed uranium for 10 years. Didn't do anything for the longest time and I didn't do anything because the only thing on offer was Cameco, which I was ambivalent about or these junior miners with these theoretically great assets that they were not being developed, they just owned the land package. Maybe the mine would get built but not until uranium had moved, which is to say investing in those juniors was basically just betting on the uranium price. For the longest period of time, I just wasn't willing to make that bet. Just betting on commodity uranium price, it didn't make a lot of sense to me. The setup seemed good, but I was cognizant of the fact that it could take forever to move. It took 10 years for it to move.
Kazatomprom is the primarily state-owned uranium miner in Kazakhstan. They went public two or three years ago. I don't remember. When we invested in it, it went public. It has ample uranium, produces it very cheaply via a method called ISR, where they basically pump sulfuric acid into the ground and suck it up on the other side and they get uranium out of it. Very cheap to do.
Bill: In situ, right? Isn't that what it means?
Will: In situ, yeah.
Bill: Yeah.
Will: ISR, in situ recovery. There were free cash flow positive, rock solid balance sheet, big dividend. As I already said, "Well, this is great. This is an investment. This is an investable uranium mine." So, we invested in Kazatomprom and at the time uranium was trading at-- We invested in Kaz like $13 a share and uranium was maybe $21 a pound.
Bill: How'd you get comfortable with the political risk there or partnering with the state?
Will: I went out there, went on a tour of a bunch of the mines, met with the management team, met with some of the government. I think that political risk is one of those things that is poorly understood in that people think it's a risk that just occurs and people are subject to it without any opportunity to do anything about it. But the reality is, there's a lot of opportunity to do stuff about your political risk. So, when it comes to political risk, the question we often ask is, is this management team capable of managing political situation which they have to deal with? In the case of Kazatomprom, the team was well capable of managing the political risk that might occur, which keep in mind is basically just local communities revolting if you will.
Their top-down risk from say the federal government is quite limited. They provide a dividend to the federal government as they've moved from a state producer to more of a commercially minded producer, that dividend has continued to go up as their cost of production has continued to go down. Confiscation risk tends to occur at least historically when companies aren't paying a dividend back to the government that is substantial, not when they are paying a healthy dividend. That's something that people get confused about. They tend to think, someone's going to confiscate an asset when it's really cash flowing and it's making the government a lot of money because they're like, "We can get more." But that's not actually what ends up happening. It usually occurs when the government isn't getting paid. So, we actually considered the political risk quite low.
For instance, today, the government of Kazakhstan stepped down just today or last night, I guess. The cost of fuel has gone up, there were riots in the capital, and the government's going to turn over Kazatomprom down like 10% today on that news. But it's not going to impact their business whatsoever. They got long-term contracts with governments and institutions all over the world. It's a core source of revenue for the government. It's a key source of jobs throughout regions of the country that are not great economies in the parts of the country that the mines are at. It probably doesn't make a lick of difference whether the government turns over or not.
Bill: Interesting. [crosstalk] I didn't know if as an American investor whether or not, I just don't know that much about the geopolitics over there and how Russia interacts with Kazakhstan and all that.
Will: Yeah. So, Russia is obviously a big influence on the country, but they're stuck between China and Russia, and their biggest customer for everything is basically China now. So, they are more of a Chinese-- I'd say Chinese government has more influence over them than the Russian government at this point. The Chinese are their biggest consumer of their uranium. That's where the Chinese are going to get the uranium for all their nuclear reactors that they're building.
Bill: I think maybe more broadly, a lot of what you're dealing with is in countries that I think as a US investor, there's the perception may be of, are my legal rights going to be upheld and how do you how do you get comfortable with that? It sounds like you go boots on the ground for some of these things.
Will: Yeah. No, you got to go boots on the ground. You got to go drink coffee in a coffee shop and look around and see, "Oh, there's Starbucks here." You got to go to these countries and walk around at night and be like, "Oh, okay. It's okay to walk around at night or it's not okay to walk around at night." Or, so we have a tin mine, we're invested in in the Democratic Republic of Congo. I was supposed to go out last year to visit it and that obviously got COVIDed out if you will. But that mines in the middle of nowhere, right? So, is there any political risk? Well, it's just in the middle of nowhere and there's road, then they truck everything out. Well, maybe there is, maybe there isn't. But to really get a sense for it, you've got to go to these places and some of them can be difficult to get to Kazakhstan, just a flight to London. Kazakhstan is a very easy country to visit. Not sure you want to take a vacation there because I'm not really sure there's a lot to see, but I would be fine taking my family there. So, that's one of the questions you want to ask. When you go to these places, do you want to take your family there?
Bill: Yeah.
Will: Do you want to take your family there or you're okay taking your family there, then you don't need to worry about? What you need to worry about is different than say, a country like the DRC, where I would not want to take my wife to the DRC.
Bill: Yeah.
Will: But that's also primarily a discussion about security risk. Security risk is a really funny risk where you can often just pay your way out of a security risk. You just hire people. You hire Blackwater or Blackwater doesn't exist anymore. But you hire people like that, they throw up a fence around your mind, and nobody's allowed in, and you've got guys with AK-47s that are standing there at the door. You've dealt with your security risks. That's how they deal with it in the DRC, at least.
Bill: Yeah, it's wild. I don't know, man, living here is a blessing.
Bill: [laughs] Yes. No, it very much is. I think it's instructive to go to these places, especially, with the development discussion, and this for us, climate change is an existential challenge, but you go to these places and you realize that what is our-- or what we might consider an existential challenge here in the United States, it doesn't rank very high on their list.
Bill: Yeah. I would think they don't care at all. Fine. Somewhere on the spectrum, but you got real problems.
Will: Yeah. No, I tend to agree. I don't think the average Kazakhstani or the average Congolese person cares very much at all, or spent very much time thinking about it, especially, when they know they have to go out and collect firewood to cook dinner.
Bill: Yeah. You're trying to eat. You are not worried about, whether or not the oceans going to rise or something like that. I don't think.
Will: Yeah.
Bill: Seems like on Maslow's hierarchy of needs. Climate change is like, once life gets real good, you start worrying about stuff like that.
Will: Yeah. So, it's almost like a nice problem to have.
Bill: Yes, in a way not to not to minimize it. But yes, that's correct.
Will: Yeah.
Bill: The ability to worry about it is a nice problem to have. Let’s put it that way. Okay, so anyway back to your uranium.
Will: Yes. So, we invested in Kazatomprom on the basis of looking at a discounted cash flow analysis and with mining firms that can be really easy sometimes, especially, depending on the technical reports that they produce. In the case of Kazatomprom, they produced a bunch of technical reports and said exactly what they intend to produce the next 30 years. The mines, the assets, the geology, you can all test that out and test whether that thesis, do they have the resources to produce that. You do the math, you do a discounted cash flow analysis, you pick a couple uranium prices, you put some probabilities on it, you come up with a probability weighted return for your DCF. In our case, I don't remember the exact uranium prices we use. But we came up with about a $35 value on the asset at uranium prices that we were willing to bet on.
Now, it never hit our high uranium price but we ran through all the other scenarios if you will and in our scenario analysis and our other prices, and it came to about a $35 value, and it hit that earlier last year and so it hit our price and we sold. The question at the time was sale was, are we just going to sit and hold this waiting for one final scenario where we see uranium rising to $60 or $75 as a long-term price? Do we wait for that one scenario to unfold or do we take the gains that we've gotten based on the more comprehensive analysis that we've done that includes a multitude of scenarios any of which could still unfold? For us, we said we don't want to just bet on the commodity price again. We want to bet on the underlying fundamentals getting recognized by the market, whether the market understood those or not I don't know, but the price of Kazatomprom reflected full valuation on the fundamentals.
So, at that point we're moving on, because we're not going to just bet on the commodity price. If the commodity price is the only catalyst, we just don't want to take that bet. I don't know anyone who predicts commodity prices well. But you still need to invest in commodity producers. Not everyone does, but we do. So, I don't know if that made sense. I ran through that quick.
Bill: No, it did make a ton of sense. What it sounds like to me is, you had a scenario analysis, and you got paid for the majority of your scenarios, and the only reason to stay was maybe the bull case gets it, but the probability of that happening was not worth sticking around for.
Will: Yeah. If you zoom out and think about probabilities not from like a distribution perspective, but from a propensity to create a scenario almost like what's the energy in the current environment that produces an outcome? The setup for uranium is a good one for a big move in the price. But it's been that way for 10 years. It could be that way for another 10 years. Markets will stay irrational longer than you can stay solvent. That's the old saying. Now, we're on the long side. So, we weren't worried about solvency. But we were worried about the opportunity cost.
Bill: Yeah. It destroys your IRR.
Will: How are we going to wait?
Bill: Yeah.
Will: That's often how we at least-- So, our investments need to hit a hurdle rate of 14% on an annualized basis to get into our portfolio. That's actually how we determine the timeline for which we can hold some. We say at what point given our expected price will this no longer be able to generate a 14% return for us all in from the day we bought it? Kaz was actually approaching the date given just all the variables, etc. It was approaching the date at which we said we'd no longer be the 14% return unless it moved. Within 12 months, we couldn't bet on the price of uranium going to $60. That's a really specific bet. Twelve months, 50% rise from here, I don’t know, I'm not making that bet.
Bill: Yeah. Well, you're putting a time horizon on it, makes it's hard enough to pick where it's going to go, then you pick when, good luck.
Will: Yeah, absolutely. Timing is so hard.
Bill: So, how is running the fun? Have you enjoyed that?
Will: It's interesting. I think a lot of people started out this way. When I first started, I said, "Man, I just like to sit and read and think." So, I'm just going to be able to sit and read and think all day when I run a fund-- [crosstalk]
Bill: That's turns out you have to market yourself sometimes.
Will: Yes. It turns out that there's this whole business side to things. But I've had a lot of fun with that business side of things, and with marketing, and sales. For the people who are deep researchers and that's a lot of the Manual of Ideas crowd, they actually go hand in hand. The investing and the marketing and sales in my opinion, they go hand in hand. If you want to know what we're thinking about and what we think might go into the portfolio, read our weekly blog if you will, because that is just us taking our research and putting it into a well prose as opposed to scribbled notes all over the page. So, I've actually had a lot of fun doing that.
Then, raising capital is a bit of a slog but it's got some of its own charms if you will. When you successfully land someone who you've been courting for 18 months, and the sales cycle is 12 to 18 months for us, at least in our experience, that's a nice feeling. So, I've enjoyed it quite a bit. I have a partner, who helps with a lot of the-- he is a better analyst than I am. So, that's freed up some time for me to do more of that sales and marketing stuff, which I think is value added, and I spend more time sitting around just thinking, and he backs up a lot of my thoughts with information data facts. So, it's been fun. It's been fun. So, it's been a great five years and we've been running separately managed accounts up until this month. Last year, we secured a seed for a fund. So, all of our estimates are rolling into a fund. We've got some new investors and the seeder and the pool of vehicle launches two weeks or something.
Bill: That's awesome.
Will: So, we're moving in the right direction I think and it's been a great ride.
Bill: That's very cool. I wish you the best. I think it's super cool what you've focused on. It's something that there aren't a lot of young guys that I talk to that are focusing on it and I think that offering a differentiated product makes a lot of sense if you're looking at building any business. So, it's fun to talk to you about what you do.
Will: Well, thanks. I appreciate that and it's good to talk with you, too. I love your podcast. It's that long form conversation doesn't occur often enough. I think you have a bit of a Joe Rogan of finance, I think I said to you once.
Bill: I hope I'm not-- [crosstalk]
Will: Just sort of that long conversation that meanders.
Bill: I assure people I will not go straight down at COVID rabbit hole.
Will: [laughs]
Bill: I do hope that I come with a little bit more research, then he walks into some of these, but it's been super fun, man. I'm really grateful to be able to have the guestlist that I've had, and to have the quality of person that wants to come on. I don't know. When I started it, I was like, "Maybe I'll do five of these." Then, people really liked it. So, hopefully it continues. So far, the bookings for this year look pretty good and--
Will: How many of you done?
Bill: I think maybe 53 now or so.
Will: Okay.
Bill: Something around there.
Will: It's a lot.
Bill: Yeah.
Will: Lot of conversations.
Bill: Yeah. I think I got to figure out the cadence of-- Some weeks, I'll do two. What I try to stick to is, every Thursday people get an investing interview. And then, I'll sprinkle Monday episodes in that are outside. So, I interviewed the director of, I think, he called the Class Action Park, great movie. I put that in there. That's a Monday thing.
Will: Okay.
Bill: But I got to figure out how to balance the cadence because some people are like, "Dude, it's just so much content."
Will: Yeah. That's the world we live in. I just sit there, I was thinking about it last night actually, because I was going to bed and I'm lying there in bed and I'd listened to a book on tape for an hour, and I was like, "Jesus, has there been a moment today where I wasn't trying to consume information in some way?"
Bill: Yeah.
Will: These days, I don't know what else to do other than to consume information on a continuous basis and try to make sure the sources are good. But that's definitely a challenge.
Bill: I think and I don't know this because it's not what I do. I'm in your camp, too. But I was talking to, I think, it was on Jim O'Shaughnessy's podcast that I did with Adam Robinson, where he said, "A lot of people try to read a bunch. I try to read one thing and then think about it really, really, really hard for a while." I think there's some balance in between those two things that I'm going to try to do for myself because I do think that for a while, I was just in this constant consumption mode, and then I turn around and I don't know, I have to take the time to write down my thoughts after the consumption before consuming something else.
Will: Yeah.
Bill: It sounds silly but taking the time matters.
Will: Yeah. I agree. We were talking before about schedules and that's as one of the reasons why I tried to schedule the unscheduled times what my wife calls it. Basically, I have these big blocks on my calendar, where I've scheduled nothing.
Bill: Yeah.
Will: Because typically to have nothing to do. Sometimes, I just end up sitting there reading a book consuming. But I started carrying around these little notebooks and I used to take a lot of notes in a big notebook. But the problem I found was that the big notebook lends itself to lots of notes and lots of notes ends up being less productive, I think then almost forcing yourself to only-- In the little book like this, you can only write little teeny notes. So, it's got to be something really important. It's almost like a way of forcing myself to distill down to that which is most important as opposed to just taking notes on fricking everything I read.
Bill: I like that.
Will: I started it actually because I try to get Twitter to work for me if you will at times and I just struggle with Twitter.
Bill: It's impossible to get to work for you because it's just like little thoughts and then they disappear to the ether, in the unsearchable ether.
Will: Yeah. I get really concerned. We have a great deal of responsibility we think for that which we put out in the world. So, for me to say something in that 140 characters, it takes me an hour sometimes to write. I've occasionally tried to write tweets. Sometimes, it's taking an hour because I'm like, "Well, if I think about it this way, someone could interpret it that way. Or, they think about this way and that's not what I mean." Again, I try to I think I have a responsibility for that which I put out in the world. So, I find it quite hard. But the idea did come from the 140 characters or whatever that Twitter restricts you to, if I just have to distill every note I take down to the most important content, how do I ensure that those are the only types of notes I take?
Bill: Huh, I like that.
Will: Very small, very teeny little notebook.
Bill: I like that. I have diarrhea of the head on Twitter.
Will: Yeah.
Bill: I'm not constricted, right? So, I think that's some of what people maybe like about following me is just like, here's the thought.
Will: Yeah.
Bill: Some people will write and they'll be like, "This is wrong." Or I said something on Value: After Hours, the other day, and somebody was like, "That's not right." It's like, well, I can't talk this much and actually think about everything that I'm saying. This is entertainment folks. [laughs]
Will: Yeah. No, we all need to ease up on each other when it comes to interpreting all of our public pronouncements.
Bill: To be fair, a lot of people are very, very helpful. Like, 95% of people are helpful. I'm super grateful for it because I've had incredible inbounds and when I started this, I never thought that I'd have the network that I have, and grateful is the only word that I can really use. But there's that 3% to 5% that it's like, "Y'all need to lighten up a little." [laughs]
Will: Yeah.
Bill: It's like people.
Will: So, Twitter, I have trouble with.
Bill: Well, man, I hope that no one gets too offended at what we talked about. I really enjoyed this conversation and I hope that people stuck with it. Sometimes, when you're talking about climate change and whatnot, I don't know if people come here for that. But I'm going to really try to sell this in the preamble to the show, because I really truly enjoyed this conversation.
Will: Good. I'm glad. I did as well.
Bill: I'm doing these things, I'm going to start doing follow up Spaces, like, the Monday after the show runs or whatever. So, if you want to pop in, I'm definitely going to do one, and I'll announce the time, and I'll let you know.
Will: Yeah, let me know and follow [crosstalk]
Bill: We'll schedule [crosstalk]
Will: What is a follow-up Space?
Bill: I'm just trying to get people-- Spaces, it's like a group chat basically. It's like a big conference call. I'm trying to get people that have listened to the episode, then to come back and talk about the episode a little bit because my thoughts, sometimes, I'll listen to what I said in the episode, I'll be like, "Ah, I wish I didn't say that." So, just a way to get together. So, if you want to pop in, I'll schedule it with you, and I think it'd be fun, and-- [crosstalk]
Will: Right. Let me know when you want to do it, I'm there.
Bill: All right. Well, we'll ruin some of your schedule on scheduled time with a scheduled space.
Will: [laughs] Okay. Sounds good.
Bill: All right. Thanks for joining, man. I appreciate it.
Will: Absolutely. Thank you.
Bill: Have a good one.
Will: You, too.
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