YouSaid · the spoken record

Bill Priest

lines on the record: 126
first: 2025-01-12
most recent: 2025-01-12
sittings or episodes: 1
sources: podcast

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“Of my family of origin is that story of what my parents went through. Still carry that around with me, albeit it's different. So my view today is, again, it depends on where you are. I think my view, and I've tried to get my grandchildren to start save today, save every single day. And try and save a little, get in that saving habit. Take a 60-40 portfolio, go to Vanguard or something like that. You can choose other vehicles whenever, but get started with the idea that don't consume 100% of what you take home. It's silly. It will not. And life's long is long. You don't want to wake up one day when all of a sudden you've got a health problem that you can't afford or some other family member may have an issue. It's complicated as you get older. These extended families have, you know, if you are the most successful person.”
2025-01-12 · We Study Billionaires · RWH053: Trouble Ahead w/ Bill Priest · IDENTIFIED FROM THE TRANSCRIPT
“I guess my own feeling, and I'll back up, I want to touch again on this time and place thing because it does affect me going back to your family of origin concept. So both of my parents were born in 1906. So my dad was basically, well, he was an orphan, as I mentioned, my brother at college, but they turned 21 in 1927. Then two years of party, the roof fell in, the depression, 25% of adult men were unemployed in the 30s. And then you had World War II. That generation went through hell. I mean, they didn't spend any money on anything. They hated debt. I think my dad said, I don't know, I think the first house, the cost like we're up and costs like $10,000. He sweated and saved the $10,000. You never had a mortgage, which is unbelievable today. I mean, you just can't live like that. So to me, that's part of my history.”
2025-01-12 · We Study Billionaires · RWH053: Trouble Ahead w/ Bill Priest · IDENTIFIED FROM THE TRANSCRIPT
“Right. To me, that's also, you have to respect them. You have to respect that guy. I mean, his record is phenomenal over many, many years.”
2025-01-12 · We Study Billionaires · RWH053: Trouble Ahead w/ Bill Priest · IDENTIFIED FROM THE TRANSCRIPT
“And I can just see it. I can see it in my extended family one. I know the jobs people have so far been okay, but illnesses is a big deal. Illness can bankrupt the family today. It happens. But I think to your point, I would have a balance sheet. I mean, there's a lot of uncertainty in the world. And on a personal basis, I probably have a much lower exposure to equities today than I had 10 years ago.”
2025-01-12 · We Study Billionaires · RWH053: Trouble Ahead w/ Bill Priest · IDENTIFIED FROM THE TRANSCRIPT
“I've also, as you say, I've seen a lot. And it's that old saying, I forget who said it first, but how do you go broke? Well, slowly and then all at once or whatever. Yeah.”
2025-01-12 · We Study Billionaires · RWH053: Trouble Ahead w/ Bill Priest · IDENTIFIED FROM THE TRANSCRIPT
“Asset mix that so hurt the pants so much on the individual. But I think getting people to understand that having a balance sheet, that's what gets you through black holes. It gets you through really difficult times. At the individual level, maybe it's a disease. Maybe it's somebody loses their job. There are things at the individual level that it just doesn't go smoothly. If you live long enough, there's potholes. You won't have potholes. And you didn't see them coming.”
2025-01-12 · We Study Billionaires · RWH053: Trouble Ahead w/ Bill Priest · IDENTIFIED FROM THE TRANSCRIPT
“We didn't penalize people for selling stock. No one wanted. Many of the people did not want stock. They would say, hey, Bill, I got to pay my rent. I don't want stock. I don't sell it. So the stock went from 17 to 4. And when Lehman fell, I put everybody into a room on a Monday after that. And I have, frankly, that was the worst situation I've ever personally seen. To me, it was terrifying. The world looked like it could come to an end financially. And I said, look, if you do your job, you will have your job. There'll be no layoffs at Epi because we have more cash on our balance sheet than we have revenues. So I've always had a balance sheet to get me through difficult times. And even on a personal basis, you don't want to be too stretched out. When you're young, you can be stretched out when you're older, not so much. You better have some reserves. So to me, I would say in today's world, there is no idea.”
2025-01-12 · We Study Billionaires · RWH053: Trouble Ahead w/ Bill Priest · IDENTIFIED FROM THE TRANSCRIPT
“Sure, great question, great intro. I swore if I ever ran a firm again after BEA, I would have a balance sheet. Balance sheets matter. And when 08 happened, and EPIC, EPIC was a publicly traded stock. When we started, there were seven or eight of us. We did a reverse merger into a publicly traded vehicle. The market cap of the stock was like 13 or 14 million dollars or something. It was penis. And then we had this huge run-up in that 07 period. And then 08 struck. And the stock actually had hit 17. I went to four. Now I insisted that everyone in Epic have stock. Part of your bounty is at the end of the year. We gave you stock. Now, the stock was tradable. It was in private stock. You can sell it on the open market. There was no penalty for selling it. People have kids to send to college or whatnot. There was no...”
2025-01-12 · We Study Billionaires · RWH053: Trouble Ahead w/ Bill Priest · IDENTIFIED FROM THE TRANSCRIPT
“Retired now. But when I first met him, I just walked in, sat down in front of him and he said, Sabil, what do you think the biggest problem in the world is? I don't know, population. I don't know. He says, income inequality, it will destroy democracy. And that was 2012. And I actually think he's on to something. I don't know what we do about it. If you have a diploma, you live better than someone without a diploma. And that was the whole point of Brooks' piece. If you read that article, I forget her name, it's you call white working class. That was the name of the book written in 2016. I thought that was a terrific book. There is this divide in this country. And if you don't have a college degree, you really are left out and left behind. It's an issue. The other thing I would touch on is, and I give a talk on leadership, and maybe I could just bring that up if I may.”
2025-01-12 · We Study Billionaires · RWH053: Trouble Ahead w/ Bill Priest · IDENTIFIED FROM THE TRANSCRIPT
“Think golden me has some interest, whether it's 5% or some small amount, but I think gold. I think gold is kind of a default currency for a lot of people. And several banks are buying a lot of it. But that's small beer. What I would worry about, I guess, is what appears to be a tendency for the strong man. When I look at Hungary, for example, I mean, I remember reading about it. I knew somebody in 1955 when some of your tanks rolled in and just rolled right over them. And then there was the uprising and whatnot and they threw them out. But then I looked, what you got today with Victor Orbit, you know, he's pretty much a dictator. I think one of the issues with democracy, and I give Ed Clark, who was one of the best CEOs I've ever met in my life, he was the CEO of TD.”
2025-01-12 · We Study Billionaires · RWH053: Trouble Ahead w/ Bill Priest · IDENTIFIED FROM THE TRANSCRIPT
“Into the world. You can, I thought her book was really, really good, and there's a couple of other ones out there on it, but I think this whole autocracy versus democracy issue, the liberal tenets of the West really, really revolve around making sure we have process. And to the extent you want to get rid of that process and you want a strong man or something like that, not good. I don't think it's good for investing. I think process and the laws is good. It's the kind of environment you want to invest in.”
2025-01-12 · We Study Billionaires · RWH053: Trouble Ahead w/ Bill Priest · IDENTIFIED FROM THE TRANSCRIPT
“I would be very careful about investing in China. I'm not sure that sustainable it all is. And I'm sure that with hindsight, you probably won't be able to take a look back and say, gee, some of these things worked out pretty well. But there's no real rule of law over there to speak of. And I think you need a rule of law to prosper. When you look at democracy versus autocracy, there's a couple of really good books on that. Anne Applebaum's written a book called Autocracy. I thought it was really well done. And the liberal democracies are about process. This is how we resolve things. We resolve it through process, but not autocracies. Autocracies are about identity. And if it's, and I call it, you're not my mother. And if I don't associate you with my mother, I don't like you. And so that brings a whole other dynamic.”
2025-01-12 · We Study Billionaires · RWH053: Trouble Ahead w/ Bill Priest · IDENTIFIED FROM THE TRANSCRIPT
“Dog problems in an uproar, although I can't imagine everybody's, they know everything about you over there. You can't go anywhere without being on a camera. I haven't been there in a long time. I was there maybe 20 years ago. It was the last time I was in China. But I would worry that, you know, it's a wag the dog problem. And she is dead, you know, sooner or later, they're ours. We'll see how that plays out.”
2025-01-12 · We Study Billionaires · RWH053: Trouble Ahead w/ Bill Priest · IDENTIFIED FROM THE TRANSCRIPT
“What kind of problems are we going to have? We talked about China, for example. China has a lot of issues. I'll just touch on that for a minute. GDP is made up of four things. Consumption plus investment plus government spending plus net exports. It's kind of like economics 101. Well, China has bet an awful lot on I investments, government-directed investments, and net exports. That's what's driven their GDP. They don't have much of a safety net for the people over there. And local consumption isn't anything great either. This is an unsustainable situation as it becomes more obvious and there becomes, you know, you have huge unemployment among the youth over there right now. You've got this huge real estate problem over there that's crashing. To me, she really, it's all about the CCP, the Communist Party. And I could see how a situation, particularly with tariffs, could become bad enough that it's a wagon.”
2025-01-12 · We Study Billionaires · RWH053: Trouble Ahead w/ Bill Priest · IDENTIFIED FROM THE TRANSCRIPT
“And to me, you want to basically, the jobs are going to be over there. They're not going to be, you're going to be at risk. There'll be whole professions that will be at risk. I don't consider myself technology very, very, very good at all. In fact, I think I'm pretty terrible at it. But I did happen to write a piece recently for, actually it was for Baron said that they said it was too long. So I thought, okay, I'll shrink it down. Then I thought, you know what? I might go try and use ChatGBT. I was astonished. Absolutely astonished. It wasn't my voice, so I had to rework it into my voice, my verbs and whatnot. But it was incredible to me, just incredible. And so I'm doing this on another.”
2025-01-12 · We Study Billionaires · RWH053: Trouble Ahead w/ Bill Priest · IDENTIFIED FROM THE TRANSCRIPT
“Think is kind of unstoppable. It's going way, way back when you had the Ludites going way, way back to when we had the looms, when looms took over, the hand waving. I mean, there were strikes and upwards and all that kind of stuff. We're past that here. But you need, you're going to need a comprehension of this evolution. There's an interesting sociological argument here. It's David Brooks. David Brooks is one of my favorite writers. He has a book out on something called the Diploma Divide. It's broader than what we're talking about, but I would just suggest you take a look at that sometime. It's really pretty cool. We have placed, when you look at where industries are going, there's a tremendous pressure to substitute technology for labor and physical assets. It's just, it's everywhere.”
2025-01-12 · We Study Billionaires · RWH053: Trouble Ahead w/ Bill Priest · IDENTIFIED FROM THE TRANSCRIPT
“We were doing it here. We just want to substitute information, technology, AI, all that stuff for labor. And that is going to be a big productivity boom. If you think of what two things determine growth in GDP. Growth in the workforce and growth in productivity. Well, the workforce growth in the developed world isn't going to be very much. It's a pretty mature planet and Africa being an exception. I mean, if you take a look at the population, take a look at the working population or whatnot, it's not growing very fast. So the workforce growth rate is going to be very low. The only thing is productivity. So you've got to look at the productivity arguments. So is there productivity case for anything you're investing in? Because that's the only way you're going to be able to, I think, make money in the future. Find those companies. Good reinvest.”
2025-01-12 · We Study Billionaires · RWH053: Trouble Ahead w/ Bill Priest · IDENTIFIED FROM THE TRANSCRIPT
“I'm selling something, if I'm a retailer and I can sell over the internet and hold my sales constant, I don't have to have those hundred physical stores. My sales for dollar of assets go out. And if it turns out the third variable is assets divided by stockholders equity, which is a measure of leverage, if I can do the first two things and I like the leverage I have, I can keep that leverage and have a higher payout ratio. So I would look for companies that actually have an ability to substitute bits for atoms, substitute technology for labor, substitute technology for physical assets. Those companies are going to watch their return on assets go up. Now, is that Trenton fully valued in the stock market by PEs and whatnot? I don't know. You have to make that decision, but I would try and find those companies who actually understand the logic behind that paper. Everyone...”
2025-01-12 · We Study Billionaires · RWH053: Trouble Ahead w/ Bill Priest · IDENTIFIED FROM THE TRANSCRIPT
“That to me is worth comprehending. And I'll spend a minute on that. When you look at return on equity, it's simply earnings divided by stockholders' equity. It's just a formula. And there was something called the DuPont Return on Equity Formula that first-year finance people or accounting people, you understand that. But the beauty of Bits and Atoms, and it was in that paper we wrote, is that my desk, these books, they're all made of atom. But information comes to us in the form of bits back and forth. So if I break that return on equity into pieces, there's a profit margin times asset turnover times leverage. Profit margins would be earning supply to my sales. So if I can substitute technology for labor, for example, and hold my revenues constant, my profit margins are going to go up.”
2025-01-12 · We Study Billionaires · RWH053: Trouble Ahead w/ Bill Priest · IDENTIFIED FROM THE TRANSCRIPT
“Absolutely right. So one time I had somebody ask me one time if you're so smart, why aren't you so rich? And I said, smart people diversify. So that's the truth. You want to diversify. The future, not only is the future unknown, the future is unknowable. So if you're dealing with something that's unknowable, diversify. And you need to start saving when you're really, really young. You need to start saving when you're in your 20s. It can be a small amount of money, but you just have to start saving. And the balanced fund, the 60-40 fund, whatever. That's a perfectly reasonable way to go. But I would say I would highlight one thing, and I think, I hope that paper was sent to you about Bits and Atoms.”
2025-01-12 · We Study Billionaires · RWH053: Trouble Ahead w/ Bill Priest · IDENTIFIED FROM THE TRANSCRIPT
“Selling stuff to China because they do sell a lot of stuff to them. I don't know how that works. Can you have some tariffs? Yeah. But the history of tariffs is rarely any good. They rarely help you.”
2025-01-12 · We Study Billionaires · RWH053: Trouble Ahead w/ Bill Priest · IDENTIFIED FROM THE TRANSCRIPT
“Thing the US can probably take care of itself. But wouldn't it be nice if we shared some of that cost with Japan and Australia and maybe Europe? It's the same principle. Alliances really help you with costs. Now, the question is, I don't know how that's going to play out. We have a president who is very transactional, at least very transactional. But if you have you don't want to be in a position where you're self-insuring every terrific risk you have. It's just not a good thing. So those would be risks I look at next year. I would worry that the onshoring is likely to cause, I think, inflation. These tariffs, tariffs are nothing but sales tax. It's just another form of sales tax. And sure, you can do it. You can get people to, it's going to be in reverse. Our farmers are going to be worried about.”
2025-01-12 · We Study Billionaires · RWH053: Trouble Ahead w/ Bill Priest · IDENTIFIED FROM THE TRANSCRIPT
“But every year, one house burns down. Now what? If you have to self-insure, you're going to live in a smaller house because if it's your house that burns down, you're nearly wiped out. But let's suppose everybody chips in $5,000. So $5,000, $100 houses, we got our $500,000 now. So when that house burns down, we simply take that money and give it to this guy. That's what I mean by And so when you take a big risk like Social Security, medical issues, these have to be borne by a large number of people. The probability of affecting you was small. But if it does affect you, you have a problem. It's the police force, it's the fire. We need that. So now broaden this out to allies. NATO is incredibly valuable to the United States. It's the same.”
2025-01-12 · We Study Billionaires · RWH053: Trouble Ahead w/ Bill Priest · IDENTIFIED FROM THE TRANSCRIPT
“It's impossible to onshore the way we want us onshore without it being inflationary. So to me, stagflation starts to be a potential problem. We'll make fewer units and higher prices. And unless your wealth is going up or your income is going up, you can't afford some of this. And it gets to another example. And it's what is a government. A government is an insurance company with an army. And the way I would explain that, and I did this in a talk recently, I was maybe around 100 people in this audience. And I said, the action, they asked me what I thought government was. I said, well, it's an insurance company with an army. People kind of laughed. I said, no, just listen to me for a minute. Let's imagine that all of us live in a community. The average house is 500,000 dollars. So there's a hundred of us. Every house on average is $500.”
2025-01-12 · We Study Billionaires · RWH053: Trouble Ahead w/ Bill Priest · IDENTIFIED FROM THE TRANSCRIPT
“And so Wendy, so we had those 18. So, what's happened is you went through this globalization period and we created the most efficient supply chain the world has ever known. Well, now we're saying, wait a minute, we want security of supply chain. We no longer have a unipolar world led by the US. We have a multipolar world. We've got China and Russia and Iran and North Korea. We've got all these characters around a wheel of life. So we're going to onshore now. Well, you cannot onshore with the same cost structure. It's impossible. It would be like in our little example, we went back to being two independent countries. I'm making food and clothing as best I can. You make food and clothing. Yeah, we could do that, but we're less efficient. We're less well off. We're less wealthy. So this right now, this onshoring is going on. It's going to be inflationary. It isn't.”
2025-01-12 · We Study Billionaires · RWH053: Trouble Ahead w/ Bill Priest · IDENTIFIED FROM THE TRANSCRIPT
“Just move people around. That's not real world. And what happened is there was a hollowing out, particularly in the Midwest of major industry that went abroad, that went to China, went to all these. And we destroyed whole communities with this. And that's the backlash that we're seeing right now. You see it in elections. You see it, I see it in my little hometown of Stubanville. And Stubanville, when I grew up, there were three steel mills there. There was good wages. It was a robust. Now you go back there. It's half of the steel mill there downtown's been eviscerated. It's pretty empty. Middle class in Stoneville is, what, a cop makes or a fireman makes or a teacher. That's it. That community's devastated.”
2025-01-12 · We Study Billionaires · RWH053: Trouble Ahead w/ Bill Priest · IDENTIFIED FROM THE TRANSCRIPT
“Reorient those 100 days as to who's doing what. I get out of the food business completely. All I do with my 100 days of labor is make clothing. You make more food and you make some clothing. And Voila, if you went through that little algebra there, we have more units. We have made more units. Now, I'm not going to trade with you unless I get something, but you will get twice as many additional units as I do. So the law of comparative advantage is what was behind this incredible supply chain that we built from 1989 till recently. It was incredible. We globalized everything. Now, and the law comparative advantage was at work this entire time. The problem is in that little analogy that I just did, we assumed our labor is interchangeable, that the labor then clothing could be put into food.”
2025-01-12 · We Study Billionaires · RWH053: Trouble Ahead w/ Bill Priest · IDENTIFIED FROM THE TRANSCRIPT
“Called a law comparative advantage. And just to illustrate that for a listener would be let's suppose you and I were two countries. You were country A on country B. We meant two things. We weren't food and clothing. And the only thing that matters is labor. It takes you one day to make a unit of food and two days to make a unit of clothing. I'm country B. It takes me three days for food and four days for clothing. So on the surface, why would we ever trade? Because you are absolutely more productive in both products. Well, it turns out it's the difference that matters. You're twice as productive in food, but only 50% more productive in clothing. So what happens the way this would work out is if we were to take 100 days.”
2025-01-12 · We Study Billionaires · RWH053: Trouble Ahead w/ Bill Priest · IDENTIFIED FROM THE TRANSCRIPT
“Well, actually, where will I start with this? I'm in the process of writing another book, which we can touch on a little later. It's in its infancy. I do owe people some time, but we'll see where that goes. At any rate, the idea behind a book, let's just put it that way, if I were to write another book, what would it be like? Well, first of all, I would start with this and then a recognition of what happened in 1989. In 1989, a Berlin all fell. It was an amazing period. And Francis Fukuyama wrote a great book called The End of History Last Man. I read that book I thought it was fantastic. I'll tell you fast forward, it didn't work out that way. But the point is behind that book was think of it the death of the Isms. It was capitalism plus a little socialism. And then in globalization, and there's somebody.”
2025-01-12 · We Study Billionaires · RWH053: Trouble Ahead w/ Bill Priest · IDENTIFIED FROM THE TRANSCRIPT
“Not because they might not meet their cash flow numbers, but because if interest rates, if you were to look at the interest rate curve, maybe the short end stays the same or comes down a little bit. But the long end to me has no choice but to go up. And if the long end's going up and the spread between two and 10 years steepens, that effectively hurts the present value of any investment. But a long duration investment-like growth will be impacted more by that. Now, some of my colleagues were pushing back on me with that view, and they may be right. It may be that the earnings are going to grow you fast enough that it'll offset that. But I would even next year I would worry that you might run into the stagflation problem that we haven't had. We haven't had stagflation of any meaningful amount here for quite some time. But the 70s were full of them.”
2025-01-12 · We Study Billionaires · RWH053: Trouble Ahead w/ Bill Priest · IDENTIFIED FROM THE TRANSCRIPT
“Think businesses in their infancy, I think we can miss with that. The way I would think about it, because we did. We missed Netflix. We never owned Netflix on the way up. We just missed it. We just saw the valuation didn't meet our obviously. The reality is it was an incredible stock owned for a long period of time. But it just didn't have those cash flows. And the other thing you have is when interest rates are declining, longer duration assets do well. And that's been a benefit to growth stocks, if you will, for quite some time. You can still be doing ROIC over WAC, but the present value of that gap changes with interest rates. So once you have that spread, in fact, that was a discussion we were having a short time ago. My view is next year Rose is going to struggle a little bit. Why?”
2025-01-12 · We Study Billionaires · RWH053: Trouble Ahead w/ Bill Priest · IDENTIFIED FROM THE TRANSCRIPT
“Capital. Over time, it goes away. Over time, this thing will just anecode. They'll all go to where they're just equal. But you want to find those companies that have this spread because it's persistent. So we really try and find those companies where you have historical data that suggests the spread exists. And then you want them to say, is there any reason why that spread wouldn't exist next year? And to the extent you can't destroy that argument, you're inclined to do a little more work. You want to buy those companies. And it works.”
2025-01-12 · We Study Billionaires · RWH053: Trouble Ahead w/ Bill Priest · IDENTIFIED FROM THE TRANSCRIPT
“Other than just theoretically, what's the total addressable market? What kind of tradition do they have? What kind of unit growth can you expect? Is there any way you can forecast price stability, price growth? Then you look at, you go through your cost of goods sold, then you take a look at your SGNA, and you come up with a model. And one of the things we've done, we have a system here. We have, it's called the Epic Core model. We just updated it. And we put all the companies we look at into quintiles. Quintile one, quintile two, three, four, and five. And there is a persistency. The amazing thing is that once you get a company that scores in a first quintile this year, it turns out the chances of being in the first quintile next year is pretty high. There's a persistency of this spread between ROIC and cost the”
2025-01-12 · We Study Billionaires · RWH053: Trouble Ahead w/ Bill Priest · IDENTIFIED FROM THE TRANSCRIPT
“I think there's another, I'm trying to think of another example that might be our guys look at units, we look at elasticity of price. If you keep raising prices, can you still sell the same number of units? Well, most of the time the answer is no. At some point you just can't afford it. We look at margins and the sustainability of this, we just had a meeting before we started today. We're talking about the Trump administration. Trump administration is coming in. They have all kinds of new people and new positions and what does it mean for certain industries. You take RFK Jr. I mean you take a look at his views and it's kind of shaked my head but boy in a single day he took down the value of anybody that makes vaccine socks in the last last week or two because of his views on vaccines. I think this is just noise. Hopefully science prevails where it should. But there's no one.”
2025-01-12 · We Study Billionaires · RWH053: Trouble Ahead w/ Bill Priest · IDENTIFIED FROM THE TRANSCRIPT
“When you look at these companies, the key is who has the data? And you want to find the company that has the data on the transactions. The individuals, you can't compete with these people. And it turns out that once you've got the data, you can create what they call parlay structures where you can say, well, you know, on the first quarter, I think the Giants will lose to the Jets by seven points. And you can make that back. And somebody will give you odds. The problem is you're making a guess, but the other side's got the data. They will tell you how often that's happened and whatnot. So I think you're constantly looking at the total addressable market, how penetrated is it, and the gambling market the United States has stolen Sanfin C. So I think you can look at some of these gambling stocks and you can still make an awful lot of money. By owning the stocks, don't gamble, just own the companies that are casting out the best. They've got the data.”
2025-01-12 · We Study Billionaires · RWH053: Trouble Ahead w/ Bill Priest · IDENTIFIED FROM THE TRANSCRIPT
“Gambler, for example, we don't own any gambling stocks here, but I think we should, but at any rate, you take something like you see all these ads on TV with gambling football. It's incredible to me. What makes these companies valuable? Well, to me, there's just an enormous tendency for the average person to want to gamble, you can see it with the lottery, for example. The number of people who pay the lottery. If you buy a lottery ticket, for example, the expected return at best is 50 cents because the state keeps 50% of the money or a big chunk of it. Very little comes back. It's a bad investment. I personally have never buy a lottery ticket in my life. I just think it's a bad investment. On the other hand, take a look at DraftKings, you can look at some of these other ones. Those are really remarkable businesses. For whatever reason, legally and society now, we can gamble on anything. And the final demand is just enormous.”
2025-01-12 · We Study Billionaires · RWH053: Trouble Ahead w/ Bill Priest · IDENTIFIED FROM THE TRANSCRIPT
“And then he said, What are they going to do with it? Well, they may have to decide if they want to reinvest, and drug companies do reinvest a lot in research. And you really don't know in advance if you're going to get what you're going to get out of that dollar. It's unclear, it's often unclear, but you allocate a certain percent of it. But essentially what you're trying to do is to say, look, if we cannot earn our cost of capital by internal investments or acquisitions, we're giving it back to the shareholders or giving it back. It almost doesn't matter how you give it back, but you give it back by taking down your debt pay downs, buying back your stock, or paying a cash dividend. They're functionally the same thing for tax reasons. Maybe it's treated a little differently, but we don't make a distinction there. But when I think of some of the names that we would own, you really want to get an idea of first the TAM, the total addressable market. We think of a name.”
2025-01-12 · We Study Billionaires · RWH053: Trouble Ahead w/ Bill Priest · IDENTIFIED FROM THE TRANSCRIPT
“Well, what you would do is to basically try to understand the business that they have. Let's take the drug industry, for example. That's where I did my thesis in that area. So you want to make sure there's demand for the product itself. And you need to understand the unit demand, if you will. Are we going after a big market or is it small market? Well, let's just say it's a very large market. Take these GLP1s, with Govy and all these things. These are enormous markets, just enormous in size. And so once it gets going, then the issue is you can kind of look at what unit demand might be. And then you can take a look at what you might be able to charge, recognizing you have to penetrate a very large segment of society. It has to be affordable. How is this going to be paid for? Is it a government entity? Is it an individual entity? And you look at margins and you look at cash flow that's left over from all of this.”
2025-01-12 · We Study Billionaires · RWH053: Trouble Ahead w/ Bill Priest · IDENTIFIED FROM THE TRANSCRIPT
“Yes, yes, you got it right. What I left out was the cost of capital is everything. If you cannot earn your cost of capital, but you continue to reinvest or acquire, you're going to destroy value. So people that reinvest the excess cash flow below the cost of capital are going to destroy their business.”
2025-01-12 · We Study Billionaires · RWH053: Trouble Ahead w/ Bill Priest · IDENTIFIED FROM THE TRANSCRIPT
“A market return with less volatility. The way that's measured in what's called a sharp ratio, that product has a terrific long-term sharp ratio.”
2025-01-12 · We Study Billionaires · RWH053: Trouble Ahead w/ Bill Priest · IDENTIFIED FROM THE TRANSCRIPT
“Year in and year out, reinvest over and above the cost of capital. And if they can't earn whatever premium they're seeking, they give you the rest back in a form of dividend, share buybacks, or debt paid outs. That is the heart and soul, I think, of investing. And we were able to build two products at Epic with that. The first product we built was something we called shareholder yield, which was we wrote a book called Free Cash Flow and Shareholder Yield, New Priorities to Global Investors. And what that strategy was about was being able to tell someone, we will give you a market return with less volatility. And then you can take what we save you in terms of volatility. You can spend that money on growth or Bitcoin or whatever you want to do. And this product now has over 20 years of history. And we've delivered. We have given the investment.”
2025-01-12 · We Study Billionaires · RWH053: Trouble Ahead w/ Bill Priest · IDENTIFIED FROM THE TRANSCRIPT
“And those are the five choices. So you start with that is the beginning of everything. And then the question is, are people any good at it? Because identifying managements that are good capital allocators as part science and part art. Not everybody's good at it all the time. But the key there then is to understand what's called return on invested capital, ROIC. And then there's a phrase called the WAC, weighted average cost of capital, W-A-C. And so you want to look at the spread between the ROIC and the WACC. Now, again, a lot of times you're stuck with accounting data, not financial data. To the extent you can get closer to financial data, that's what you want. And it turns out that that spread really matters. And if you persists, you can do very well owning a company that can”
2025-01-12 · We Study Billionaires · RWH053: Trouble Ahead w/ Bill Priest · IDENTIFIED FROM THE TRANSCRIPT
“With free cash flow. Now, there's only five things you can do with a dollar free cash flow. You can pay a dividend, buy back stock, pay down debt, make an acquisition, or reinvest in your business. If I have a retail setting, I will take that same argument and talk about my granddaughter's lemonade stand because she has the same set of choices at the end of the summer as that CFO that a company has. And depending on the retail depending on the sophistication of the audience, they kind of identify with that story. I mean, after she's paid all, bought all the stuff or lemonade and whatnot, she's got some money left over. She can basically dividend it to herself if she has her sister and whatnot. She can split that. She can buy out her sister. That's like a stock buyback. She can buy out the neighbor's girl down the street and say, don't come back next year and I'll pay you to stay away. That's like a CapEx thing.”
2025-01-12 · We Study Billionaires · RWH053: Trouble Ahead w/ Bill Priest · IDENTIFIED FROM THE TRANSCRIPT
“Given all my background in accounting, I have background accounting, finance, and economics. Accounting is astrology that finances astronomy. That's a distinction I would make. So I can make earnings anything you want using a variety of fully acceptable accounting standards. So I often think of accounting as just being a bit of a mythology, but you cannot hide cash. So let's give a definition of cash flow. And believe me, we batted this around, we still batted around occasionally about what is cash flow and what is free cash flow because cash flow often has claims on it. So free cash flow is the cash available for distribution to shareholders after all cash dividends and all cash taxes. So those are claims. So one of the known claims on the operating cash flow of a business, and that leaves you.”
2025-01-12 · We Study Billionaires · RWH053: Trouble Ahead w/ Bill Priest · IDENTIFIED FROM THE TRANSCRIPT
“Yes, absolutely. And Jack had, we talked a lot about, I tried to hire Jack as director of research at BEA when I got to be senior enough. And I hired everyone from 1972 until 2000. I hired every single person that came to BEA. And that was a good thing in Alzheimer did. He let me hire everybody. We built a bond capability. We built a derivatives capability. It was an amazing, amazing period of time. And I tried to get Jack to come in. No one liked Jack because he was so acerbic. He was this iconoclast. Jack was difficult. It was a difficult person a lot of ways. And I said, Jack, all you got to do is be nice. And I can bring you in as head of research. And Jack just had a way of, once he decided he did want to be there, he just communicated that in a number of ways. And people said, I can't work with. This guy. Jack was difficult.”
2025-01-12 · We Study Billionaires · RWH053: Trouble Ahead w/ Bill Priest · IDENTIFIED FROM THE TRANSCRIPT
“And change the term. And then everybody else, you can see him copying it down. And then he would go to the next board. But pretty soon, the paper was just, you couldn't understand anything because he had erased so many things and gone back and fixed it. And then we'd have his conclusion. And people would kind of nod their heads. But it was impossible. And Jack did this on purpose.”
2025-01-12 · We Study Billionaires · RWH053: Trouble Ahead w/ Bill Priest · IDENTIFIED FROM THE TRANSCRIPT
“And then when you leave, the water level goes down. So, you want to capture that step up in a water level along with the commission. And I wrote a paper on that and I won a little prize out there. Delivering papers in front of those prize guys is scary. I got to tell you they are so smart. And Trainer used to be out there too. But he was a maverick. And a couple things Jack would do. Everybody knew Jack was brilliant. So back then you had real blackboards and you had blackboard and chalk and whatnot. So people, Jack was, and the blackboards were, let's imagine a square. And so there would be a wall here, wall there, wall over here. So you kind of go around the room. And so Jack would start writing his formulas on one side. Then he'd go over here. Then he'd stop and he'd say, then you go back and erase something on this board.”
2025-01-12 · We Study Billionaires · RWH053: Trouble Ahead w/ Bill Priest · IDENTIFIED FROM THE TRANSCRIPT
“Those things. And I gave a couple papers, but I work and I knew these people. When I looked at Myron Scholz, for example, I got to know pretty well. He was at my wedding and I was at his wedding. This is a second marriage, but not the first one. But at any rate, but he was, I got to know him pretty well. And those people out there, and as the 70s and 80s, that was just an amazing, amazing period for finance in Chicago led everything. Chicago was the center of all that. And I gave a paper there on trading costs, other major trading costs, because most people just thought it was a commission. Well, that really wasn't the best way to look at it. And the analogy that I often used was a bathtub. Let's think of the water in the bathtub as being the market's trading. And you step in with a big hundred thousand share order. It's like stepping into a bathtub. The water level goes up.”
2025-01-12 · We Study Billionaires · RWH053: Trouble Ahead w/ Bill Priest · IDENTIFIED FROM THE TRANSCRIPT
“That to me was curious. He was always curious. And Jack had an unpublished paper that was the equivalent of the capital asset pricing model. There were academics who knew all this paper. Bill Sharp's work was done independently of Jackson. I'm not saying Bill Sharp stole his paper or whatnot. But there were these two papers were around at the same time. Jack never published his. Had he published it, he would have shared that Nobel Prize with Bill. And Bill would be the first one to tell you how brilliant Jack was if you ever, Bill would have done that. Bill was never, I got to know Bill Sharp too. Actually, back in those days, I left this out of it. I spent a lot of time at CRISP, which was the Center for Research and Securities Prices at the University of Chicago. Chicago to me was the leading center of quantitative academic research at the time. I love going.”
2025-01-12 · We Study Billionaires · RWH053: Trouble Ahead w/ Bill Priest · IDENTIFIED FROM THE TRANSCRIPT
“You come with real street credit. You're an analyst, the CFA, with a five star fund that's closed. You walk in the door with a level of credibility. You don't have right now where you are. I don't think he ever agreed with me, Bill, to be honest with you, but he today is one of the two or three best people I've ever hired. He's a terrific person and he's a very good analyst at PM.”
2025-01-12 · We Study Billionaires · RWH053: Trouble Ahead w/ Bill Priest · IDENTIFIED FROM THE TRANSCRIPT