YouSaid · the spoken record

Adam Seessel

lines on the record: 57
first: 2022-07-22
most recent: 2022-07-22
sittings or episodes: 1
sources: podcast

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“Value discipline. And then we've got this incredible technology that's come from nowhere in the last 10 or 15 years. And how do you put them together? How do you synthesize the two? That's what I'm trying to do. That's what the book's about.”
2022-07-22 · We Study Billionaires · TIP465: Value Investing in the Digital Age w/ Adam Seessel · IDENTIFIED FROM THE TRANSCRIPT
“Well, Trey, first of all, thank you for the kind words. I know you read a lot of investment books, so that's high praise from you, and I really appreciate it and am touched by it. You know, in terms of me, even though I understand social media, I really don't like being on it. So you can go to Amazon and buy a copy of the book, of course, or if you want to support your local bookseller against Darth Vader, go to the local bookseller, Simon& Schuster has a webpage on my book with the reviews from Bill Ackman and Joel Greenblatt and also links to local booksellers. And then the one service that I use, the one social media service I use because I like it, it's pretty low key, is LinkedIn. So if people want to hit me up on LinkedIn, I've had several really nice chats with readers and I'm happy to connect with people who want to learn more about how to invest in the digital age. Because it's an important question. I think in many ways it's the important question. We've got the central”
2022-07-22 · We Study Billionaires · TIP465: Value Investing in the Digital Age w/ Adam Seessel · IDENTIFIED FROM THE TRANSCRIPT
“Airbnb, including Adobe. Just go down the list. You probably know ones that I don't know. But this has nothing to do with interest rates or easy credit. This has to do with harnessing technological change and then making it an incredible consumer product that people love and trust and will never leave.”
2022-07-22 · We Study Billionaires · TIP465: Value Investing in the Digital Age w/ Adam Seessel · IDENTIFIED FROM THE TRANSCRIPT
“Think the answer to that is pretty obviously no. I mean, anyone can come up with a good sound bite about termites and this and that. You know, good investments don't start with sound bites. They start with analysis. So the reason tech companies have appreciated so much, Trey has zero to do with interest rates, has zero to do with macroeconomic factors. It has to do with two things. One, in the last 10 or 15 years, technology has hit critical mass to where broadband connectivity was robust and computing power became affordable so that everyone could afford a smartphone. So that's number one. Technology just hit critical mass. And number two, a certain select group of companies figured out a way to make moded businesses out of these tech trends, including Apple, including Google, including Amazon, including”
2022-07-22 · We Study Billionaires · TIP465: Value Investing in the Digital Age w/ Adam Seessel · IDENTIFIED FROM THE TRANSCRIPT
“Like, it's the same. It's the same. So, you know, markets are going to do what they're going to do, as we said in the beginning, but in the end, superior businesses prevail. I mean, look at Apple from 2010 to 2020. The stock market did nothing, right? It was the lost decade. The beginning of the decade, you had the dot-com bus, at the end of the decade, you had the financial crisis. The S&P was flat, but Apple was up by multiples. Why? Because they had good business. And I'm not just sort of being cavalier or flippant. It really kind of is that simple and it really does pay, in my experience and in my opinion, to go back to first principles and think about it like a 12-year-old.”
2022-07-22 · We Study Billionaires · TIP465: Value Investing in the Digital Age w/ Adam Seessel · IDENTIFIED FROM THE TRANSCRIPT
“Well, I don't think Buffett writes off macro, and neither do I. I mean, he says, and he's right, that interest rates are the single most important determinant of stock valuation. So in that sense, it's rational that the market decline as the Fed is now raising interest rates. But on the other hand, he's right, and Peter Lynch is right that it's not a stock market. It's not an abstract thing. It's a market of stocks. And I encourage you and your listeners to think about it like a grocery”
2022-07-22 · We Study Billionaires · TIP465: Value Investing in the Digital Age w/ Adam Seessel · IDENTIFIED FROM THE TRANSCRIPT
“Competition came along and how differentiated is a selfie stick really. So you look at GoPro stock price, which I put in the book, it's a disaster. So I don't know the answer to Roku Trey, but I know the question, which is, do they have a moat? And that's what you should be asking yourself. And by the way, if you can't figure out whether they have a moat, they don't have a moat.”
2022-07-22 · We Study Billionaires · TIP465: Value Investing in the Digital Age w/ Adam Seessel · IDENTIFIED FROM THE TRANSCRIPT
“I wish I learned about Roku earlier because Roku has very interesting business dynamics. I mean, they've basically interposed themselves between the streaming services, Netflix and Amazon, and the viewers. And they said, we're our connection. And we're a toll bridge because we have the biggest share of streaming devices. We're going to charge you to go over our toll road to get to the consumers. Now, I haven't studied it intensively, so I don't know the answer about Roku backing up the truck, but I know the question, which is the same question you always want to ask yourself, is there business sustainable? Are they going to be able to withstand the competition that is definitely coming for them, just like people came for Google, to try to steal their riches, because there's a lot of money there, or are they just going to go the way of GoPro? GoPro is a great stock. People loved it.”
2022-07-22 · We Study Billionaires · TIP465: Value Investing in the Digital Age w/ Adam Seessel · IDENTIFIED FROM THE TRANSCRIPT
“It's an excellent question because rising interest rates compress or depress multiples because net present value and all that stuff. But not that I had a crystal ball, but I knew that when I wrote the book, which was kind of at the peak valuations, I knew that valuations would probably come in. So I feel comfortable still with 20 times. 20 times free cash flow or earnings power is a 5% free cash flow earnings yield. So if I'm getting paid 5% day one and then the business is going to grow, so year two, I make 6%. In year three, I make 8%. In year four, I make 10%. I think 5% is a fine place to start, and I'm okay with it.”
2022-07-22 · We Study Billionaires · TIP465: Value Investing in the Digital Age w/ Adam Seessel · IDENTIFIED FROM THE TRANSCRIPT
“Really knows what drives shareholder value, they're going to adjust the financials and run their company according to economic reality rather than gap financial reporting. You know, as I said, beesos should have shut that company down a long time ago if he believed GAP, but he was making all these sort of adjustments like Buffett did with GEICO and Intuit's doing with LTV to CAC. And it's interesting.”
2022-07-22 · We Study Billionaires · TIP465: Value Investing in the Digital Age w/ Adam Seessel · IDENTIFIED FROM THE TRANSCRIPT
“To hell with this, this is such a great product. I'm going to tank my profits in GEICO and spend like a drunken sailor on marketing because I know that those marketing spend like Intuit will have a positive lifetime value. So in 1999, he spent $250 million on marketing in Geicow. He spent the entire profits of the company four years before and marketing. So does that mean they were, quote, making no money? Well, according to Gap, yeah, but he knew that that was baloney and he wrote about it in the annual. He said, yeah, the profits look like they're down, but the intrinsic value is going up. And this is what tech companies understand. I mean, tech guys are engineers. They are quants. They measure everything. So if you find a company like Intuit or Amazon where the guys, the management,”
2022-07-22 · We Study Billionaires · TIP465: Value Investing in the Digital Age w/ Adam Seessel · IDENTIFIED FROM THE TRANSCRIPT
“Revenue at a 20% margin is $60 million of profit, and I spent $100 million to get it. So that's a 60% return on capital, right? $60 million over $100 million. But that never shows up in the financials because all those marketing dollars were expensed immediately. So this is one hack that tech companies use to say, yeah, the gap's wrong. These are not expenses. These are long-lived assets that we're creating. And so we're going to rejigger the financials to think about it correctly, not correctly the way Gap tells me, but correctly the way business people think. Buffett has done this. EBA Geico, Geico's public company in 1995. He bought it for Berkshire. Geico, the last year they reported financials, made $250 million in profit and spent $35 million in marketing. When he bought the whole company and he could control it, he said,”
2022-07-22 · We Study Billionaires · TIP465: Value Investing in the Digital Age w/ Adam Seessel · IDENTIFIED FROM THE TRANSCRIPT
“You know, once you start running your small business on QuickBooks, hard to get off, hard to rip those guts out of the back office. So they know that if they spend a dollar on customer acquisition, they want to get multiple dollars of revenue over the lifetime value of that customer. So it's customer acquisition cost in relation to lifetime value. So into it, like many tech companies, wants to spend a dollar of marketing spend, and they think that they'll get, they want, the hurdle rate is $3 of lifetime value of customers. So I spend $100 million of marketing turbo tax, I'm hoping that over the lifetime, the customers I acquire from that marketing spend will spend with me $300 million. And let's just say that the profit margin on those customers is 20%. And that's probably low, but let's just say 20%. So $300 million are”
2022-07-22 · We Study Billionaires · TIP465: Value Investing in the Digital Age w/ Adam Seessel · IDENTIFIED FROM THE TRANSCRIPT
“I'm so pleased you picked up on that because it's a very obscure, not very obscure, but relatively obscure concept that not a lot of people get. But it's extremely important to tech companies. And it goes back to sort of the outdated accounting rules, Trey, in the sense that intuit, which is another great company that I own that I talk a lot about in the book, we haven't spoken about, but they use lifetime value over customer acquisition costs a lot. Because when they spend marketing dollars to get new QuickBooks customers or new terms,”
2022-07-22 · We Study Billionaires · TIP465: Value Investing in the Digital Age w/ Adam Seessel · IDENTIFIED FROM THE TRANSCRIPT
“Find anything to buy, he'd buy back his own stock. So he ran with a lot of leverage. And by the way, insurance companies are levered vehicles. What do you think an insurance contract is? It's a form of debt, right? I'm the insurance company. I sell you a policy. I'm on the hook to you to pay you the claim. So I don't actually think that's a good marker.”
2022-07-22 · We Study Billionaires · TIP465: Value Investing in the Digital Age w/ Adam Seessel · IDENTIFIED FROM THE TRANSCRIPT
“Not really, Trey. Tom Gaynor is a good friend of mine and a great investor, and I admire him. And I don't know the conversation. But the fact is that some businesses can afford very high levels of debts and some can't. So the general rule of thumb is the more steady the business, the more debt you can put on it. So consumer products companies, which don't have highs and lows, can take a lot of debt. And that actually improves not the return on capital, but it improves the return on equity, which is a related concept. Whereas cyclical businesses, airlines, manufacturing companies cannot take on a lot of debt because, you know, you could have a lot of debt and then the recession comes and you can't pay off your debt. So Tom Murphy, who I write about in the book carried tons of debt, he would lever up to buy a company, then he would use the cash flow for the TV stations to pay the debt down. Then he'd do it again. He couldn't buy”
2022-07-22 · We Study Billionaires · TIP465: Value Investing in the Digital Age w/ Adam Seessel · IDENTIFIED FROM THE TRANSCRIPT
“That I run happens to be the vehicle. All good managers think that way. They just want to say I'm investing X and I'm getting Y. What am I getting? What do I have to invest? What am I getting? And if it's not a good investment, I'm not going to do it. I'm not going to do it because it's cool or I build an empire to myself. I'm going to do it because I'm a cold-blooded manager who knows how to drive value. And that's what you want to look for”
2022-07-22 · We Study Billionaires · TIP465: Value Investing in the Digital Age w/ Adam Seessel · IDENTIFIED FROM THE TRANSCRIPT
“To generate a dollar of profit. So their return on capital is 10. Coke, if you put in all the bottling plants, which they put off balance sheet, but that's just a trick to try to trick investors to think that they're more asset-like than they are. But the rating agencies require a Coke to put all their bottling assets on the balance sheet. So if you look at that, one over six, their return on capital is 17, 16, 17%, which is good. Anything in the teens is good. But Facebook was, what, one over two? 50% return on capital. So you want a high return on capital businesses, and you need to understand I'm going to invest X and I'm going to get Y. And you want to be thinking, you know, almost like there's got to be a cold-bloodedness to your management. Like, I quote this guy who runs this great aerospace company called Haiko in the book. He's like, yeah, I happen to be in the aerospace business, but really I'm just in the cash generation business. And the aerospace company.”
2022-07-22 · We Study Billionaires · TIP465: Value Investing in the Digital Age w/ Adam Seessel · IDENTIFIED FROM THE TRANSCRIPT
“Can you know they're taking the sheep and they're taking the milk and they're taking the barley or whatever and you want to look for a manager who really acts like an owner. Owning a lot of stock is a good sign, but it's not always the right sign because Murphy didn't own a lot of stock, but he acted like an owner. And some guys, or in some women, own stock, but they're ignorant of the drivers of value. And so they ruin shareholder value. They want to act like owners, but they don't know how to be. And that's the second characteristic that I talk about in a book. Are they financially savvy? Do they understand the drivers of value? And it's not like you have to be some sort of financial whiz. You do have to understand a few basic principles. And the central one is return on capital. So, you know, it's a very simple calculation where you have the assets that you're required to generate the profit and then the profit. So this is what you talked about when I said Ford has to spend $10 of assets.”
2022-07-22 · We Study Billionaires · TIP465: Value Investing in the Digital Age w/ Adam Seessel · IDENTIFIED FROM THE TRANSCRIPT
“They would reward him, he would reward them, and everything would work out. Now, the second kind of executive, which is all too common in publicly traded companies, is the guy who's there or the woman who's there for five or ten years to run the, you know, from age, you know, 55 to 65. And they've got 10 years, and they're basically, they're not playing defense, but they're kind of playing not to lose, just kind of keep it in the middle of the fairway. Don't do anything stupid, and basically get paid as much as you can. Get the board to give you as much stock comp and perks, you know, airplanes and life insurance and security details and the perks go on and on. And these people do not act like old time stewards. Carl Icon has this great image of, you know, these guys are like the caretakers of a giant English estate. But instead of taking care of the estate for the owners, they're just skimming as much as they can.”
2022-07-22 · We Study Billionaires · TIP465: Value Investing in the Digital Age w/ Adam Seessel · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, I mean, the two things I say in the book, Trey, are, you know, do they act like owners? Because they're basically two managers of companies. And this is especially true in publicly traded companies where the rewards of being a manager are very, very high. So one kind of manager acts like they actually own the business. And I talk in the book about Tom Murphy, this great manager that Buffett knew and trusted, who ran TV stations and then ABC and then for a brief time Disney. But he didn't own a lot of stock, but he was just this old school guy that believed that he was a steward for the shareholders. And he got rich. I mean, look, he got wealthy, but he never got obscenely wealthy. He never saw the company that he was running as a vehicle for his own personal enrichment. He believed that he was running it for the shareholders. And if he ran it for the shareholders,”
2022-07-22 · We Study Billionaires · TIP465: Value Investing in the Digital Age w/ Adam Seessel · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, and I make the point in the book, and it's an important point. You know, financial analysts, it's not a precise exercise. It's not like we're aerospace engineers where we're trying to get to a millimeter or the plane will fall out of the air. You want to kind of get in the ballpark. Buffett said, you know, I want to be directionally accurate, or it's better to be generally right than precisely wrong. So, and you can play with these estimates that I make, I show in the book, I outline all my work and say, well, you know, just tell me that you don't think that the e-commerce margin is 10, it's 5, or whatever, and play with it. It actually doesn't make that much of a difference. I think it moves the multiple from 15 times to 18 times. So 15 times, 18 times, I mean, that's still below the market multiple for, you know, a way above average business. So you don't want to be too cute about it. You just want to kind of get in the ballpark.”
2022-07-22 · We Study Billionaires · TIP465: Value Investing in the Digital Age w/ Adam Seessel · IDENTIFIED FROM THE TRANSCRIPT
“So their advertising businesses are now running $34 billion a year, which is almost assuredly pure profit. But just to be conservative, I put a 50% profit margin on that. So when you add up all those segments, the e-commerce margin is not 2%, which is reported. The e-commerce margin, in my estimate, is 15%. So it's 7x. So when I was looking at Amazon, the multiple on a reported gap basis was 90 times, but on an adjusted basis, on an earnings power basis, it was 15 times. And so that sounds pretty good. So I bought a lot during the pandemic.”
2022-07-22 · We Study Billionaires · TIP465: Value Investing in the Digital Age w/ Adam Seessel · IDENTIFIED FROM THE TRANSCRIPT
“And the Swifter wet jets and keeping them inventory. Amazon is not. They're using their platform to say to other merchants, hey, roughly five out of every ten searches online for shopping, come through Amazon.com. Put your products on our website and we'll sell them for you. And we'll take a little cut. That's an enormously profitable business because they're not buying the cost of goods. They're not buying the inventory. They're just using their platform as a platform. So that's very asset-like. And so the best comparable there is eBay, which has a similar just sort of sitting there, you know, letting people transact goods. And those margins are 25%. So I ascribe a 25% margin to third-party sellers. And then the best one is because 50% of all people come to Amazon to search for goods online, merchants, consumer product companies, everybody wants to advertise on the website.”
2022-07-22 · We Study Billionaires · TIP465: Value Investing in the Digital Age w/ Adam Seessel · IDENTIFIED FROM THE TRANSCRIPT
“Of an e commerce retailer who has no stores and who does all their business online. So I walk through the segments in the book and I say, well, e-commerce, at least 6%, because that's what Walmart is. So I kind of get into the, what, 9-10% range, I think, for e-commerce. Then I go to physical stores. You know, they own Whole Foods and subscriptions. And those are both very low margin businesses. Subscriptions they use as a loss leader. They give me prime video and they give you prime video just to cement us into the prime retail ecosystem. Ooh, I've got Prime Video. What a nice little add-on so that they can make money off of us in e-commerce. But those have a very low margin. But then there are two very high margin segments, which have really recent segments. There's what they call the third-party seller segment where they're not buying the books and the electronics and the printer.”
2022-07-22 · We Study Billionaires · TIP465: Value Investing in the Digital Age w/ Adam Seessel · IDENTIFIED FROM THE TRANSCRIPT
“So Amazon has two main segments. They have the cloud segment, Amazon Web Services, and then they have everything else, most of which is e-commerce related. So they report Amazon Web Service as a 30% margin, which is a healthy margin. So there's no need to make adjustments there. But their e-commerce or everything else besides AWS, if you just look at the annual report in 2020, which is when I really got conviction on Amazon, their e-commerce margin was 2%. That's what the GAP financials wanted you to believe. Walmart's margin was 6%. So if you believe that Amazon's e-commerce margin was 2%, then you were basically saying Amazon is a third less profitable than Walmart. Like that's what the financials were forcing you to believe. And if you believe that, then, you know, I don't think you should be in the business because it's absurd that a brick and mortar retailer would have three times the profitability.”
2022-07-22 · We Study Billionaires · TIP465: Value Investing in the Digital Age w/ Adam Seessel · IDENTIFIED FROM THE TRANSCRIPT
“Basically, the theory, the concept tray is that comparing Amazon to a mature company like Wells Fargo is like comparing an apple orchard in the spring to an apple orchard in the fall. You know, one is ready for harvest, Wells Fargo is ready for harvest. It's not going to grow a lot. Well, you know, a basic bank. It's mature. So yes, they spend money on marketing and this and that. But they're basically in profit maximization mode. They're trying to bring every dollar they can down to the bottom line. So their margins are going to be very high. Digital companies are in the opposite camp. They're like an apple orchard in springtime. The apples aren't ripe yet. You don't want to pick them. You want to be plowing money back into the fertilizer and pruning and all that stuff. Amazon just now caught up with Walmart in terms of”
2022-07-22 · We Study Billionaires · TIP465: Value Investing in the Digital Age w/ Adam Seessel · IDENTIFIED FROM THE TRANSCRIPT
“Every year, what are you talking about? Of course, it has a multiple year life. It's building out the mode. So R&D expenditures used to be speculative, and some still are speculative, but many, many, many are not.”
2022-07-22 · We Study Billionaires · TIP465: Value Investing in the Digital Age w/ Adam Seessel · IDENTIFIED FROM THE TRANSCRIPT
“It's a good point, and I would argue that they should be expensed. And if you think about the history of R&D, you know, back in the 50s and 60s, all R&D was a moonshot. It was like some guys in the back with a beaker and stuff figuring out whether they could come up with a great new product. So of course it should be expensive over one year. But now with these giant companies like Google spends a lot of money tweaking its search engine. They tweak the search algorithm twice a day to make it better, faster, more relevant to keep the moat durable, to throw sharks and alligators in the moat, to make sure that nobody can get at them. But all those expenditures are expensive. And of course the expenditures on their search engine has a multi-year life. It's obvious, but not a gap doesn't recognize that. Similarly, every dollar that Amazon spends on its e-commerce website, expensed.”
2022-07-22 · We Study Billionaires · TIP465: Value Investing in the Digital Age w/ Adam Seessel · IDENTIFIED FROM THE TRANSCRIPT
“So your profit is 95, but if you're a tech company and you have $100 of revenue and you spend $100 of R&D because all those $100 are immediately expensed, your profit is zero. So tech companies have underreported earnings, basically, because of the outdated accounting rules. They will change, I think, but until they change, we as intelligent investors need to make adjustments.”
2022-07-22 · We Study Billionaires · TIP465: Value Investing in the Digital Age w/ Adam Seessel · IDENTIFIED FROM THE TRANSCRIPT
“Expense is categorized as something that has less than a one year useful life. So factories have a 20 to 25 year useful life roughly, depending on the factor. So I spend $100 on a factory and I'm U.S. steel or General Motors and it has a 20-year useful life. Every year I expense $5 of that $100, right? $100 divided by 20 years is $5 a year in expense. But R&D expenditures, which are the lifeblood of tech companies, R&D, in a sense, is the plant. It is the factory. It is the wheel, the engine room of a tech company. Well, accounting rules now say that all those expenses must be the vast majority, 90-some percent must be expensed immediately. So if you're an industrial company and you have $100 of revenue and you spend $100 on a new plant, you only expense $5 of that.”
2022-07-22 · We Study Billionaires · TIP465: Value Investing in the Digital Age w/ Adam Seessel · IDENTIFIED FROM THE TRANSCRIPT
“You just have to start in the historical context, Trey, you know, gap, generally accepted accounting principles, which is what the SEC basically requires all companies in the US to follow, was promulgated in the 1930s after the Depression. The federal authorities said we need to standardize accounting so that investors know what's going on. And in the 30s, General Motors, U.S. steel, Ford, coal companies, they were the big companies out there. So if you build a house, that's an asset, not an expense, because you're going to live in your house for more than a year. But your water bill is an expense because you use your water immediately.”
2022-07-22 · We Study Billionaires · TIP465: Value Investing in the Digital Age w/ Adam Seessel · IDENTIFIED FROM THE TRANSCRIPT
“A year bet on an unproven technology could work, could be huge, could have first mover advantage, but it's not, you know, I don't bet on miracles. I bet on moats. And we'll see what happens in the metaverse. But right now his core business is very vulnerable, and I think he knows it.”
2022-07-22 · We Study Billionaires · TIP465: Value Investing in the Digital Age w/ Adam Seessel · IDENTIFIED FROM THE TRANSCRIPT
“I think there's not to pick a bone because there's still a lot of numbers, but I think Facebook as a company has 3 billion monthly users and 2 billion are on blue Facebook. So it's only 2 billion. It's still a lot of people, to your point. But Trey, those network effects can unravel as fast as they ravel. Network effects happen very quickly. And when they unravel, they unravel very quickly. I mean, we've already seen this. Look at Yahoo. Remember when Yahoo used to be the biggest search engine? And then Google just made a better, faster, more relevant one. You know, all of a sudden, down the tubes. So if people decide to congregate elsewhere besides Facebook, it's kind of going to get over real quick. And it seems like that's starting to happen with TikTok. And I think that's why the company is now called Meta. He's making this $10 billion.”
2022-07-22 · We Study Billionaires · TIP465: Value Investing in the Digital Age w/ Adam Seessel · IDENTIFIED FROM THE TRANSCRIPT
“moderating their content costs, I'll be interested. But until then, it's just an arms race. It's an arms war. It is literally hunger games where they're all out there saying, I'll spend $10 billion. No, I'll spend $15 billion on content. No, I'll spend 20. And it keeps going up and up and up. And who wins? The consumer, but not the company. And then the other one I've never liked, which is getting its come up, is Facebook. Facebook has many of the characteristics I've described, network effects and winner-take-all and asset light and so on and so forth. But on the other hand, Trey, they never had the best social media site. Like no one ever goes, oh, it's awesome. Like you and I would never rave, I don't think, about Facebook the way we would rave about Google, right? It's just like people are on it. People are on it because people are on it. And that makes them very vulnerable. And if you look at the history, you know, WhatsApp came along.”
2022-07-22 · We Study Billionaires · TIP465: Value Investing in the Digital Age w/ Adam Seessel · IDENTIFIED FROM THE TRANSCRIPT
“I've never liked, and I'll tell you why, and this is just, you know, all trying to help you and your listeners develop sort of thought patterns, remotes. I'm never like Netflix, you know, never made sense to me. I never understood what Netflix's moat was. They make movies and put them online for people to stream. Anybody can do that. So I thought, and sure enough, that's what's happening, you know. Hulu, Apple, Amazon, Paramount, Disney. I mean, keep going. And some of these companies are actually have an edge over Netflix because they have original content. They have content libraries. They don't have to keep spending on. Disney has a huge back catalog. They can just put out there and it's the costs are already spent. So I never got Netflix. And I think, you know, look, Netflix might appreciate, they might figure it out. And by the way, if they start...”
2022-07-22 · We Study Billionaires · TIP465: Value Investing in the Digital Age w/ Adam Seessel · IDENTIFIED FROM THE TRANSCRIPT
“You can time it, but you can't move it. So that's the kind of business. That's like the archetypal moat. Even these didn't say moat. He said, Mount, you want a mount. You want a tank. You want a battleship. Pick your metaphor. But you want a business that competitors have tried to go after and can't or game theory it out. Amazon, same, 50% share of e-commerce, Walmart 6 or seven years ago said, we got to get into this game. They tanked margins by a lot. They spent a lot of money on e-commerce. You know what their market share is now of e-commerce? Yeah, it's close. 7%. I read your book. Yeah, right. Yeah. So anyway, you know, if Walmart, the biggest retailer on earth, tries to make a run at Amazon and has less than 10% share. Pretty good sign that it's hard to replicate that business. So then the other two that”
2022-07-22 · We Study Billionaires · TIP465: Value Investing in the Digital Age w/ Adam Seessel · IDENTIFIED FROM THE TRANSCRIPT
“And failed. Or you could even say who could take a run and sort of game theory it out. How could they tunnel under the moat? So let's take four companies, and I won't dwell too much on them, but let's take four discrete companies. And we can go through the moat or lack thereof. So Google or Alphabet, you know, which used to be called Google. So Microsoft spent $15 billion a year trying to beat Google in search. They have a less than 5% market share. Less well-known. Amazon took a run at Google and search. Some years ago, Bezos hired the guy who wrote the first search engine, developed the first search engine for Yahoo. Said, build me a search engine so we can compete against Google. A couple years later, the guy quit and he left. For Google, he went to Google. Apparently Bezos had a huge temper tantrum. So after that, he said, you know, treat Google like a mountain.”
2022-07-22 · We Study Billionaires · TIP465: Value Investing in the Digital Age w/ Adam Seessel · IDENTIFIED FROM THE TRANSCRIPT
“an amazing brand and he'd hate to give that competitive advantage away his brand and the second moat he has which is less obvious is because they make I think what two-thirds of all electric vehicles and they've scaled up like a classic manufacturing business their unit costs are 25 less than the competition so he has a secondary mode which he has a low cost model so he can say all he wants that moats don't matter but if you went to him and said okay well we're taking away your brand and we're taking away your cost advantage wait wait oh okay wait wait a second you know it's like his bid for Twitter he takes it back but anyway to your question about moats I actually find it easiest tray when I think almost like a 12 year old like I don't overcomplicate it you may be I don't know you may be overcomplicating things in the sense of you know just ask yourself who's taken a run at this company historically”
2022-07-22 · We Study Billionaires · TIP465: Value Investing in the Digital Age w/ Adam Seessel · IDENTIFIED FROM THE TRANSCRIPT
“It's a good question and a multi layered question, and you're absolutely right. 90 plus percent of all tech businesses are going to go the way of 90% plus of business in every other industry. Doomed to failure or mediocrity. I mean, anyone who's spent any time in the business world knows it's brutal out there. It's the hunger games, man. I mean, people are going after one another. And especially in tech, I mean, tech is especially brutal. Move fast and break things, you know. You've got to have a secret salts. And I read Elon Musk's comments, and I thought about them. And he's absolutely right that innovation is critical. But like many things, Elon says, you know, it's a little disingenuous. So Tesla, for example, has a couple of moats that I'm sure he would hate to give away. I mean, his first mode is his brand, right? He has 100% brand recognition. Tesla's a”
2022-07-22 · We Study Billionaires · TIP465: Value Investing in the Digital Age w/ Adam Seessel · IDENTIFIED FROM THE TRANSCRIPT
“making money they don't have any competitive advantages carvana comes to mind those stocks are getting crushed and those stocks probably deserve to be crushed you know you have to make a distinction between temporary impairments of value and permanent impairments of value so that's the babies in the bathwater you know and that's the trick right now is to find the babies and if you make these price adjustments you'll see in my opinion that stocks like Amazon, Google are exceedingly cheap.”
2022-07-22 · We Study Billionaires · TIP465: Value Investing in the Digital Age w/ Adam Seessel · IDENTIFIED FROM THE TRANSCRIPT
“And for about a third of their life, they have not had reported annual earnings. They've had losses. So as I say in the book, Bezos would have folded up his tent a long time ago if those numbers were right. It's just they're wrong. The gap financials are wrong. We've got to make adjustments into the numbers because as you suggest, Trey, Google, Alphabet, I mean, take your pick, these companies are not going away. Yeah, there was a dot-com bus, but as I said earlier, Alphabet makes seven times more than Coke now. Like, what those profits are just going to evaporate? Like, what? Amazon sells more, as much stuff, maybe a little more now than Walmart. Like these companies are here to stay. Now, there is a secondary.com bus going on in the market now in mid-22. You know, a lot of companies came public, SPACs, their story stocks.”
2022-07-22 · We Study Billionaires · TIP465: Value Investing in the Digital Age w/ Adam Seessel · IDENTIFIED FROM THE TRANSCRIPT
“The stock market has compounded 11% a year, which is better than it has over the last 100 years. So the market remains the best place to build wealth, and there's sections in my book about crypto and meme stocks and ESG investing, and all of them, I think, are basically people being disaffected by the markets and trying to find some alternative. And I'm proposing in the book, look, my alternative is invest in what you know, which is tech. You have an edge over me. You tray and your millennial friends have an edge over me because you understand TikTok better than I do. You understand this stuff better than older people like me. So use your edge. Yeah. And then we're going to get into the more technical stuff about price. But I say in the book that I think Amazon's average PE multiple since at IPO is 150 times earnings on reported earnings.”
2022-07-22 · We Study Billionaires · TIP465: Value Investing in the Digital Age w/ Adam Seessel · IDENTIFIED FROM THE TRANSCRIPT
“Well, first of all, I'm really glad you picked up on that point about the millennials. I say millennials understand tech, but they're afraid of the markets. And older people like me understand markets, but they're afraid of tech. And the book is really my attempt to come to terms with tech. And I write there that my son, who's a 26-year-old software engineer, is one of my best teachers when he can keep his patients with me, that is. But yeah, look, I mean, what I say in the book is to millennials, I understand why you would be shaken by the markets. You know, you've had, as you say, dot-com bust and you had the great financial crisis, then you had the pandemic. You've had three major crises in your life. So I said, I get it. I understand. But on the other hand, be rational. Look at the data. Have your emotions, of course, but then move to the data, which says that since 1988, which is the sort of the mean year of the millennial birth year,”
2022-07-22 · We Study Billionaires · TIP465: Value Investing in the Digital Age w/ Adam Seessel · IDENTIFIED FROM THE TRANSCRIPT
“And people tend to standardize on them. Google makes seven times more money than Coke does. And Google's only been around 20 years.”
2022-07-22 · We Study Billionaires · TIP465: Value Investing in the Digital Age w/ Adam Seessel · IDENTIFIED FROM THE TRANSCRIPT
“It's very high return on capital because they have no few physical assets. And then you get into things like, you know, once people have figured out that Google is the best search engine, people standardize on it. So there's network effects. So the more people that use Google, the more advertisers want to use advertisement on Google. And Google has more money to make their search network better. And this virtuous circle goes around and around. Airbnb says more guests create more hosts and more hosts create more guests. So you have this sort of winner take-all or winner take most dynamics that you see in categories like online search and e-commerce and social media and short-term home rentals. So for many, many reasons these companies are just sort of the biggest, baddest economic beast ever created. I mean, they're just really, really powerful business models. Asset-like high market”
2022-07-22 · We Study Billionaires · TIP465: Value Investing in the Digital Age w/ Adam Seessel · IDENTIFIED FROM THE TRANSCRIPT
“Other many, Tradi. I mean, let's first start with probably the most important one, which is tech companies don't produce anything physical. Their raw materials are zeros and ones, and so they have no cost of goods to put it in accounting terms. Coca-Cola was probably the best late 20th century business model.”
2022-07-22 · We Study Billionaires · TIP465: Value Investing in the Digital Age w/ Adam Seessel · IDENTIFIED FROM THE TRANSCRIPT
“economy but he also understands the principles of gravity in terms of what drives value in a business so management is very important and then price and price is also extremely important you know I wouldn't call myself or I couldn't be able to call myself a value investor if I didn't think price was sort of the veto question so you can have a great business you can have a great manager but if the price isn't right you're gonna have a crummy investment So you have to be very careful about what price you pay. And as you suggested earlier, a central problem that I wrestle with in the book is these tech companies have looked expensive since they IPO'd, and yet they've appreciated thousands fold. So that leaves us with an existential question. Either we're due for a dot-com bust, like we've never seen before, or the metrics that we've used to calculate price are wrong. And I conclude that the second premise”
2022-07-22 · We Study Billionaires · TIP465: Value Investing in the Digital Age w/ Adam Seessel · IDENTIFIED FROM THE TRANSCRIPT
“That capitalism is so fiercely competitive that its excess profits will be competed away relatively quickly. So quality business, business quality is the most important. After that, there's management. In the book, I say Google probably has a better business pound for pound than Amazon, totally asset light, every incremental search is potentially 100% profit margin. You can't say that about every incremental package that Amazon delivers because they have to build at a certain point more warehouse space. So Google is a better mousetrap as a business. But Amazon has been the better stock. And that's because Jeff Bezos is the greatest tech manager out there. He started a hedge fund. So he understands these financial concepts. He was an electrical engineering major, but then he also started his career at a hedge fund. So he's married old school business principals with new age. He understands the digital”
2022-07-22 · We Study Billionaires · TIP465: Value Investing in the Digital Age w/ Adam Seessel · IDENTIFIED FROM THE TRANSCRIPT
“Well, this is a checklist I devised for myself over the years. And like an airline pilot, that's where the checklist started, actually, the cockpit. So they avoid error prior to takeoff. Have you done this? Yes, have you done this? So, you know, my investment checklist, as you say, revolves around three central variables, the quality of the business, the quality of the management, and then the price you're being asked to pay. So BMP for sure. You know, as I say in the book, those are the three most important variables in my experience to superior investing. So business quality is the most important metric. If you start out with a crummy business, it doesn't matter what you pay. The business will fail and degrade and eventually go out of business. So there can be, you know, at some point, no price is cheap enough to buy a failing business. You have to have a business that has competitive advantages. You have to have a business that has a secret sauce, an edge. Buffett called it a moat. If you don't have”
2022-07-22 · We Study Billionaires · TIP465: Value Investing in the Digital Age w/ Adam Seessel · IDENTIFIED FROM THE TRANSCRIPT