YouSaid · the spoken record

Terry Smith

lines on the record: 143
first: 2025-02-09
most recent: 2025-02-09
sittings or episodes: 1
sources: podcast

Every line below is reproduced as it was said and linked to the record it came from. Nothing here is summarised or generated. Directory · Search · Corrections

“Put up the five P's, so five uppercase P's in a frame. And the five P's stands for preparation prevents PISP-POR performance. Don't turn up for something without having prepared. Don't go to a company meeting and you haven't read the last results and the note that you wrote before, you know. And it originated from a time when I was in broking and I went on a trip to Scotland when I was at UBS instead of research with the CEO and a salesman. The salesman, I'd come from another broking firm and I'd looked at our Scottish biome figures and they were terrible and the salesman said we were number one or top three or something in Scotland. We clearly weren't. And so we decided we'd resolve this by going to Scotland. Why not? And we were there having a meeting with the general accident as it was in Perth. They were lovely guys. I knew them. But, you know, they were lovely guys. But with that nice steely, you know, sort of bit in the middle that you get with the Scots, which is good. And we were having a conversation about what they saw about the service. And they said, well, what do we think about the service? How much did we pay you last year in commission as a brand?”
2025-02-09 · We Study Billionaires · RWH054: Billionaire Brit w/ Terry Smith · IDENTIFIED FROM THE TRANSCRIPT
“I say to every new recruit that we've had with some success but not universal, I say before they begin, I say I use exactly the phrase, the day job is not glamorous. What we do is not sitting here having great thoughts on investment. I said, we don't sometimes have one for a couple of years or more at a time. The number of Microsoft's and IDEX's and things that we pull out that is relatively rare. And if you've got one, we'd love to hear about it. But we don't, you know, when you've got three in the first week, we're going to get a bit suspicious. The reality is it's about modeling and collecting data and listening to calls and writing up notes and looking so that we've got a record that we can read back through and read what's gone on historically. And that's really the vast majority, the vast majority of what we do.”
2025-02-09 · We Study Billionaires · RWH054: Billionaire Brit w/ Terry Smith · IDENTIFIED FROM THE TRANSCRIPT
“Then try and build a fund management business. And I said, well, it's like when I was head of research at UBS, people used to come to me because one of our analysts was a very heavy guy, been a hammer thrower at college and put on a lot of weight. And when he sat on the toilet seats, he used to break them because you know they stand on these little blocks that are up there. This guy, if he wasn't, and people would go and say, I just cut my ass on the toilet. And I'd have to say, Lacis, could you just sit down a little bit more carefully? Because I've got people keep coming. It's like, you know, the way I would put it is the day job isn't glamorous when it comes to managing businesses. Quite a lot of the day job isn't sort of striking a pose like Rodan's the thinker and having great strategic thoughts, right? It's actually about execution and implementation. And a lot of execution and implementation does involve dealing with toilet seats and the like. It just does.”
2025-02-09 · We Study Billionaires · RWH054: Billionaire Brit w/ Terry Smith · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, I mean, look, one of them is that change requires time quite often, notwithstanding me saying acting quickly is good, because if you act quickly, you've still got change to implement, you may change the person, you've got change. And quite often money and effort and lots of other things. I got a very good friend of mine who's got a steel business in the UK. And he said, when he was a quoted company, which he's not anymore, he went private and that was that. He said that analysts ringing up ask him about how to change things reminded him of the foreigns, but it was funny when he said, they think that I've got these two buttons on my office wall, a red one and a green one. When I come in the morning, I press the green one, which is labeled make money. And then when I put my coat on to go overnight, I think, oh, must remember to press the old red bub. He said, it's a bit more complex. We've got a design product, we've got to get orders, we've got to build moles, right? And I think unless you've actually done that, it's difficult to understand. I mean, it's like people who sometimes come out of running a fund.”
2025-02-09 · We Study Billionaires · RWH054: Billionaire Brit w/ Terry Smith · IDENTIFIED FROM THE TRANSCRIPT
“But the willingness to deal with things when they go wrong, I quoted in my letter that I said, you know, we had Unilever where we had a battle that lasted many years. I mean, you could say through two CEOs to try and get the place straightened out. In comparison with Nike, the chief executive screwed up the bricks and mortar. He's gone. I don't think it is terrible. One of my mantras about running a business is I don't think you should ever be allowed to fire people unless you've been fired yourself, right? Because you need to know what this feels like. And if you're going to sit in a room and you're going to actually fire people, you need to be able to talk to them from a position of empathy, I think, in my view. So I'm not in favor of just going like a chainsaw of people, but I am in favor of dynamism. And dynamism only comes that you're describing in part from grasping not just money going for new ideas, but also how to deal with problems. The dynamism of changing where people...”
2025-02-09 · We Study Billionaires · RWH054: Billionaire Brit w/ Terry Smith · IDENTIFIED FROM THE TRANSCRIPT
“Because that's my view on them, essentially. But both sides of the divide in the UK seem to me to have a rather large responsibility for this lamentable state of affairs.”
2025-02-09 · We Study Billionaires · RWH054: Billionaire Brit w/ Terry Smith · IDENTIFIED FROM THE TRANSCRIPT
“Now that's the same as the median income of the UK. What went wrong? Because something's definitely gone wrong. I mean, think about, because I think one of the things that strikes a lot of people when they travel around America outside of the main conurbations is how poor America is once you get out into the boonies. Well, yeah, but the UK is pretty all over, you know, outside of those enclaves of London and a few other major cities, the UK is as bad as not just America, but the poorest state in America. I'm not being party political in terms of my views on this. My view is if they, I don't vote in elections in the UK, I'm not on the electoral register, but if they had an election, they had a draw, they could bring me an...”
2025-02-09 · We Study Billionaires · RWH054: Billionaire Brit w/ Terry Smith · IDENTIFIED FROM THE TRANSCRIPT
“Not new, you know. If you take the textile industry, it originated in the north of England Industrial Revolution, then it migrated to America in the northeast after the Civil War, and then it migrated to places like Hong Kong. And then it migrated from places like Hong Kong to places like Mauritius. And then it's gone from this become a middle-income country, it's gone to places like Ethiopia and Cambodia and Madagascar. And it keeps moving. And you have to move on yourself. It's no good saying, well, I think we'll start. I'm not lamenting the absence of the textile industry from the dark satanic mills in Northern England. You have to move to new industries. But you do need to move to new industries. You don't need to have half the population employed by the public sector, which it is. That's not going to be helpful, right? Because they aren't actually going to create anything whatsoever. Here's a statistic for you. The poorest state in America is Mississippi. And the median income in Mississippi, and I'll give you an exact figure, but not on this call, but is about 44,000 US dollars.”
2025-02-09 · We Study Billionaires · RWH054: Billionaire Brit w/ Terry Smith · IDENTIFIED FROM THE TRANSCRIPT
“Whatever you want to call it, spirit abroad in the UK. And it's been problematic, I think, for a very long time. I don't think, I think one of the biggest differences with America, and like you, I love Neil. I had an apartment in York for some time and spent a lot of time there, is I think on the whole, and I realize this is a generalization, Americans wish to emulate success. Britons wish to destroy or criticize it. That's my take on it. I'm afraid, you know, I don't think that's helpful, really. We've got to learn to appreciate people who are successful and applaud it and wish to emulate them and multiply it, not bring them down in some way. So the other thing about the UK is I think you're probably right about London. But once you go outside London, the thing that becomes evident to me is a number of things. One of them is it's been somewhat hollowed out. I mean, the industries which we used to rely on for manufacturing have by and large gone. But going back to what I was saying earlier about progress, that's...”
2025-02-09 · We Study Billionaires · RWH054: Billionaire Brit w/ Terry Smith · IDENTIFIED FROM THE TRANSCRIPT
“It's trip London, I think, and I'm a Londoner, so I feel strongly about London. I think it's the greatest city of the world probably, but I'm obviously not exactly objective in that opinion. And it's sad, I think, that what you describe is at least parliamentary. Well, that's really explains the British economy and where it stands. I think also what the British economy has been good at in terms of innovation, and it's got a great record of innovation in healthcare. It's got great drugs and other areas. It's got it in technology in a number of regards. ARM in terms of low power chips for mobile telephony, they've dominated that over time. It's got it in a number of brands as well, that over time that it's developed, which have been very good. But I think that the problems that it exhibits are, in the end, I think there is, in my view, an anti-entrepreneurial, anti-kind of capital.”
2025-02-09 · We Study Billionaires · RWH054: Billionaire Brit w/ Terry Smith · IDENTIFIED FROM THE TRANSCRIPT
“And Japan, at least until very recently, businesses weren't run for the benefit of shareholders. They were run for the benefit of the employees and the wire Japan, as it were. Returns on capital and things like we're discussing were like, hmm, okay. So that's why we haven't got very much. It's not that we don't like them. We actually have a bit of a soft spot for European companies in the industries that we like, which are run by families and have a very long-term perspective. So if you're looking at our portfolio, things like L'Oreal, LVMH, Atlas Copco, you know, we do like them, but they're rarities. Sorry, I interrupted you there. Go ahead.”
2025-02-09 · We Study Billionaires · RWH054: Billionaire Brit w/ Terry Smith · IDENTIFIED FROM THE TRANSCRIPT
“It's funny you should say that. We happen to know that when they were looking for a chief executive, and by the way, this is not meant to be in any way a crisis in the country. I think it's a good guy. But he is an internal appointment. The reason he's internal appointment amongst anything else is they went out to headhunters to try and get a CEO. And when you start, if you're looking for a headhunter for a software firm, you'd start in Silicon Valley pretty much, wouldn't you? So they got a headhunter there and said, go around, see if you can find any COOs or number twos or whatever. We'd like to step up. And the response you've just had is the response they got from everybody. Never heard of it. God, I don't think that Europe is about to overtake the United States in any of the areas that we've identified as being good businesses. No, I can't see any. I can't see China is difficult because you don't truly own the business, right? I mean, you are actually in partnership with the Chinese government for good Oreo, particularly in the high-tech businesses.”
2025-02-09 · We Study Billionaires · RWH054: Billionaire Brit w/ Terry Smith · IDENTIFIED FROM THE TRANSCRIPT
“I'm talking about list in the UK sage and account, which, by the way, is a good business. I've got nothing against Sage. Please don't take it as that. It's a very good business, in fact. But that's it. An accounting software company based in Newcastle is the UK's biggest. Indigenous technology company.”
2025-02-09 · We Study Billionaires · RWH054: Billionaire Brit w/ Terry Smith · IDENTIFIED FROM THE TRANSCRIPT
“See what's driven the market in recent times because look at the heights of technology in terms of the companies. And I know I am a billion other people going, oh, that's a bit worrying in terms of the size of their domination of returns. But what's the biggest UK technology company?”
2025-02-09 · We Study Billionaires · RWH054: Billionaire Brit w/ Terry Smith · IDENTIFIED FROM THE TRANSCRIPT
“They're like a boxer who's pumped up in the gym, who's been fighting, he's been in the cron gym in Chicago, fighting the best heavyweights in the world in sparring. And then he turns out and he's finding a hometown fighter somewhere in another country. I wonder how this is going to go. So you've just got to bear in mind, it's the biggest economy with the biggest capital market. And the companies, the Coca-Colas and the Microsofts and the Strikers and so on, have had the ability to build a fantastic base there before they move out into the wider world and take on the local competition. Then you get on to other factors as well when you look at the world at large. You know, Europe, the great saying is America innovates. Europe, China replicates, China or Japan replicate. And Europe regulates. I mean, some of the stuff that's going on in Europe, like the Digital Markets Act, they may as well put up a sign here saying high tech not welcome, obviously. And it's kind of sad if you...”
2025-02-09 · We Study Billionaires · RWH054: Billionaire Brit w/ Terry Smith · IDENTIFIED FROM THE TRANSCRIPT
“The biggest market in the world before they move out and take on the world. So whether it's in technology or healthcare or consumer and so on, they sit there and they become the dominant player then. Then when they reach out into the wider world, it's very difficult for”
2025-02-09 · We Study Billionaires · RWH054: Billionaire Brit w/ Terry Smith · IDENTIFIED FROM THE TRANSCRIPT
“Is the US just a persistent winner? We're right, by the way. And we've continued in sins, and we were right. Look, the US is the biggest economy in the world. Let's just start with that, shall we? Secondly, it has the most active capital market in the world. So when we're talking about where companies are listed, you know, increasingly, as you'll see, much of the chagrin of people in London, companies are listing in America, which are not in America. So, I mean, given that it's the biggest economy, and given that it's got the most active capital market, I'd almost say if you're doing what we're doing, why haven't you got more companies in America than it was? How does this work then? Because if you are a company thinking of listing, if I were thinking of listing, why would I think about doing it in London? The greatest depth of market, the biggest liquidity, the most investor attraction is in New York, isn't it? And then you think about how companies become big and very profitable companies. One of the things that helps American companies is that they get the opportunity to build their strength.”
2025-02-09 · We Study Billionaires · RWH054: Billionaire Brit w/ Terry Smith · IDENTIFIED FROM THE TRANSCRIPT
“Inquiring mind. He actually really likes the stock market and he likes, he's lived in America for, I don't know, 30 years now. And he's got a wealth of knowledge about America and the stock market that he brings to bear in a way that I simply can't, as much as I deal with Wall Street or worked on Wall Street and I'll never have that length and depth of knowledge that he's got, you know?”
2025-02-09 · We Study Billionaires · RWH054: Billionaire Brit w/ Terry Smith · IDENTIFIED FROM THE TRANSCRIPT
“And really, he's just duping me, right? I mean, and somehow he manages to get my, he might have a point about looking at it that way. And I go and buy it. And really, I realize, no, he just taught me into that, didn't he? He realized that if I hadn't been talked into it, I would always have been sitting there going, no, it's a bit too expensive. And then we never owned it. So he just found a clever way of bloody spoofing me into it, didn't he? And he did. And he's got a great”
2025-02-09 · We Study Billionaires · RWH054: Billionaire Brit w/ Terry Smith · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, I think that Julian is very intelligent. He's also got a first in history, by the way, and very honest. And he's different to me. And amongst the differences are that he sometimes sees things in terms of the subtleties of what's going on that I miss. And he's got a very, very good way of pointing them out to me without pissing me off, basically. He can get me to understand something without getting into a fight over it. And that's quite important. He just says, no, I wouldn't buy that because of this. And have you thought about this in terms of, and he's almost got a way of saying buying L'Oreal, he'll go, well, you know, I think if you take the P ratio roughly, look at it in a mirror and add your car license plate, it's okay.”
2025-02-09 · We Study Billionaires · RWH054: Billionaire Brit w/ Terry Smith · IDENTIFIED FROM THE TRANSCRIPT
“I explore that one too all the time. A good man knows his limitations. He's told by the chief of police, he's being asked to deal with the ransom to the bad guy. And he says, we don't want any gunplay from you, Calayan. He said, I was a cop for 20 years and I never ran holes in my weapon. He says, that's good. As man knows his limitations, it's great quote. The move is littered with great quotes that you can learn something from, in my view.”
2025-02-09 · We Study Billionaires · RWH054: Billionaire Brit w/ Terry Smith · IDENTIFIED FROM THE TRANSCRIPT
“Money. It's going to just follow the money, right? And there's lots of examples of things like that. You know, we play to ourselves clips when we're explaining things day in day out. There's the bit in Casablanca where the gendarme goes to close down Rick's cafe and he blows his whistle and he says, this place is closed down. I'm shocked, shocked to hear there's been gambling here. And one of the waiting stuff comes by and goes, you're winning, sir. Whenever we read one of these things about, yes, apparently somebody has been bribing people to do business in Nigeria. We always play the Casablanca kit, right?”
2025-02-09 · We Study Billionaires · RWH054: Billionaire Brit w/ Terry Smith · IDENTIFIED FROM THE TRANSCRIPT
“Here's what he wants to hear disregards the rest. Yeah, I mean, look, you can get, I'm quite serious now, you can get an awful lot of stuff from the movies and from song lyrics because people spend quite a lot of time sometimes on movies and on film lyrics. Yeah. And so sometimes they've got a bit more meaning than just somebody, Simon and Garfunkel playing a nice tune. I mean, one that we quote all the time is the movie All the President's Men about the Watergate affair, which has got so many quotes in it anywhere. And the bit where Deep Throat is the FBI Deputy Director, I don't know what it is, but he's giving information to Woodward paid by Robert Redford. And he meets him in the car park. One of his critical piece of advice is follow the money.”
2025-02-09 · We Study Billionaires · RWH054: Billionaire Brit w/ Terry Smith · IDENTIFIED FROM THE TRANSCRIPT
“Well, how would I know? I said, Well, I think that's kind of more important, don't you, than Tunbridge Wells. So your kids are not using it anymore. What are they using? Instagram, I said, you do know they own that too. The plural of anecdote isn't data. Deal with the facts. There's an old TV series from the 50s called Dragnet. And the detective, whose name I can't remember, would always be interviewing a suspect, a witness to something that had just occurred, a murder or robbery or something like that. And they'd be gabbling and he'd say the facts, ma'am, just the facts.”
2025-02-09 · We Study Billionaires · RWH054: Billionaire Brit w/ Terry Smith · IDENTIFIED FROM THE TRANSCRIPT
“They were right, but not in the way that they meant it. And it's like sometimes when people are just absolutely mad about things about you shouldn't own this, you do get this opportunity where a large, very good business gets offered to you at a price where you just shouldn't get. Meta was another one after the Cambridge Analytica thing. Meta really was a gimme in terms of it. I mean, it's gone up 500% or something like that since that point where we owned it. And we received a cacophony of invective from people about how we shouldn't own it. I mean, I mentioned, I quote my previous annual letter, in this year's annual letter saying, I'm almost thinking of having a fund that just buys the one share everybody tells me not to own. Because they're working off emotion and anecdote, right? You know, people were saying nobody's using Facebook anymore. I mean, I remember saying nobody's using Facebook anymore. I said, oh, right, okay. Where do you live? Well, Tunbridge Wells.”
2025-02-09 · We Study Billionaires · RWH054: Billionaire Brit w/ Terry Smith · IDENTIFIED FROM THE TRANSCRIPT
“Look at something like this is a company with returns on capital around 30%, right? And revenue growth now has been coasting about 20% for a long period of time. This shouldn't happen. If we think we found one of these and we have found them, we've found it in IDEX, infection equipment, we found it in Microsoft, we found it in Domino's pizza back in the day, we sit down and think, are we missing something here? And what we tend to do as a sort of check on sanity as much as anything else is go and look at what the detractors are saying. What are the detractors saying? What are they saying is the reason? And I remember an awful lot of the Microsoft stuff, roughly speaking, just said, well, it's not Apple, is it? Well, no, it's not. Is it? We figured that out all on our own. Very famously, in my view, the financial times lex column, and I do know which journalists wrote it at the time, but obviously they haven't got a byline on it. Nobody should own it at this price.”
2025-02-09 · We Study Billionaires · RWH054: Billionaire Brit w/ Terry Smith · IDENTIFIED FROM THE TRANSCRIPT
“On average, they price good companies better than bad companies. So we're going to have to pay a higher price for our good companies than the average. People keep coming, oh, it's a bit expensive. Yeah, well, it's going to be because it's a better company. But once in a while, some form of madness overtakes them and they offer you something which they really shouldn't. It's kind of like, how does it happen? So we started buying Microsoft when it was $25 a share. It's $420 something today, right? And it's been in our top performance eight years running. This shouldn't happen with a company this size. It was trading on a P of about eight when we booked it. Because, you know, Steve Balmer, I don't know, Mr. Baum, I don't really want to be critical of him, but he clearly hadn't been a happy period when he was there. And they'd missed out on the whole mobile telephony thing. Then they bought Nokia and that would be pretty disastrous. And they bought Skype, which had been pretty disastrous tool, which is ironic given that Teams is now such a success. And so there we were. And when we think looking at things like that,”
2025-02-09 · We Study Billionaires · RWH054: Billionaire Brit w/ Terry Smith · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, I mean, for a really good company, we are very bad at one of the things we're very bad at is estimating the impact of compound returns as human beings. When you look at the difference between a 10% and 12.5% compound return, the difference over 20 or 30 years isn't 25%. People don't realize actually it quadruples the capital value at differential. Wow. And we're very bad at that, you know, unless you sit down and compute it yourself. And so people don't figure that out, I think, very well, which means that commonly things which are able to make persistent eye returns and growth do not get full valuation. L'Oreal is a great place in point with that particular calculation. It's astonishing. But if you look at that table, L'Oreal, you could have paid 100 for Pepsi, 100 times P for Pepsi in that. But look, as much as we acknowledge that, and we do acknowledge that markets, whilst they're not completely perfect, are completely imperfect.”
2025-02-09 · We Study Billionaires · RWH054: Billionaire Brit w/ Terry Smith · IDENTIFIED FROM THE TRANSCRIPT
“Telephony thing and handed that to Apple basically. That was before we bought it. And they have actually made a comeback in business computing in terms of mobile devices with the Microsoft Surface and so on and so forth. And we'll see where they go in. But all of this is built into a company which has regularly produced high growth in revenues and high returns on capital. I'll tell you what they are while we're talking. Give me a second. I'll just log on. Log on to my system and tell you.”
2025-02-09 · We Study Billionaires · RWH054: Billionaire Brit w/ Terry Smith · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, yeah, let's take a couple of words on Microsoft, you know, it's the world's leading supplier of computer operating systems. Your computer probably works on it. My computer definitely works on it. The vast majority of business computing is done using its operating systems. If you go back to when we bought it, that was its leading business, Windows. And it had the servers and tools, professional business. It had a change of management, which we were hoping for shortly after we bought it. And its new management took it into other things which were linked into here. So, you know, it's now vines with Amazon Web Services to being one of the leaders in the provision of cloud computing services. So, you know, using distributed computing rather than having the computing sitting here on our desktop, using the cloud to back up our information and process it and do it on a common platform is something which is they've basically been one of the two leaders in since that thing. They're also a leading in gaming. Although they screwed up the mobile.”
2025-02-09 · We Study Billionaires · RWH054: Billionaire Brit w/ Terry Smith · IDENTIFIED FROM THE TRANSCRIPT
“Over there are in a sector that's good but are bad or in a sector that's bad but there's the old good one. You have to be careful.”
2025-02-09 · We Study Billionaires · RWH054: Billionaire Brit w/ Terry Smith · IDENTIFIED FROM THE TRANSCRIPT
“That's what they supply. And what they're really in is in the fulfillment of business. They're supplying stuff to help you do. They're supplying the stuff that helps you. You don't really work out what the bulk costs of the container of chemicals is. You just want to know it's going to be there waiting in your laboratory in the morning when you come in. And then, of course, the funnel frontier is they have a certain amount they supply, which is corrosive or poisonous or radioactive, in other words, difficult. And that gives them an edge as well in terms of the ability to safely supply ingredients like that. And so it literally had chemical on the tin, but it wasn't really. It was actually a company which had trained scientists to use its ingredients in experiments. And its average supplier wasn't, you know, it's not like a bulk chemical company supplying thousands of tons of phosphate or something. Their average pop costs 400 bucks last time I looked. And that, so it says it's chemical, but it's not really. So you've got to be careful about those, the ones that cross.”
2025-02-09 · We Study Billionaires · RWH054: Billionaire Brit w/ Terry Smith · IDENTIFIED FROM THE TRANSCRIPT
“And it's in the consumer safety set, but it's not great, is it? And then you mustn't get hooked up on sector descriptions. Sometimes people will say, well, do you invest in chemical companies? No, terrible. But you own a company called Sigmoldrich. It was taken over. We did own it. It wasn't really a chemical company. What it was was a company. Yeah, it literally made chemicals, but it made little pots of chemicals, which it supplied to biochemists doing experiments and tests. And so they were trained as biochemists to use it.”
2025-02-09 · We Study Billionaires · RWH054: Billionaire Brit w/ Terry Smith · IDENTIFIED FROM THE TRANSCRIPT
“School and it's good versus the trickier is when you get into a sector which is commonly populated by quite good companies but you get businesses in there which are not good and that does happen from time to time just like you occasionally get sectors where they're bad sectors but there's a good one let me let me give you a couple of examples you know out of there you know if we looked at in consumer staples a sector that was generally good and we looked at Kimberley Clark the company that makes toilet tissue and kitchen towel and and tissues and so on it's not a great business i'm afraid the uh you know the the business of making paper towels isn't something where there's a great deal of brand loyalty you know i don't know how many people go down the the supermarket and feel they've got to buy scotk so they've got to buy clinics they just want a paper towel they're really not concerned about it as much as they would be if they put this into their body if it were to about food and drink and medicine and so on it's not got the same kind of brass drink”
2025-02-09 · We Study Billionaires · RWH054: Billionaire Brit w/ Terry Smith · IDENTIFIED FROM THE TRANSCRIPT
“Outlook's 3,000 airlines, quite a large number of the owners and operators aren't even trying to make money. They're national flag carriers, right? They're owned and operated by governments using your money. They don't care. They really don't care. Or they're owned by entrepreneurs who really like their names on the side of planes. So when you look at sectors, you say, well, I've got the financial statistics. And it's the opposite. Well, we do. Okay, so the statistics are good. How do they make that? How do they make that? This is, they're really terrible. Why? Well, we can look at all the reasons why. We can look at those terrible sectors and look why. So, you know, if you look at mining and minerals or oil and gas or transport, including airlines and banking and investment, banking and insurance and real estate, it's dire. They're just dire sectors. You almost need to begin the discussion about the individual company that somebody's telling you about. You almost need to begin to think about it. Think back to the Stern business.”
2025-02-09 · We Study Billionaires · RWH054: Billionaire Brit w/ Terry Smith · IDENTIFIED FROM THE TRANSCRIPT
“Atmospheric conditions, things happen to stop them flying from time to volcanic dust clouds and things like this. They can't control their main input costs, which are fuel, lower price, staff, largely unionized and so on, and the cost of aeroplanes. Basically, they are buying airplanes from two suppliers. And then you get onto this. Hopefully this is a rhetorical question. Is an industry a good industry or a better industry if there are fewer from an investment standpoint? If there are few participants or many participants, well, the answer surely is few participants, right? I mean, ideally one would be great. But, you know, if we've got to have it, a duopoly is okay. These are a mastercard, cope and pepsis, so on. Last time I checked, and I'm sure I'm out of date before anybody sort of rings up or writes under your podcast, he's an idiot, but the last time I checked and I haven't bothered checking for a long time, there were 3,000 airlines in the world. Then bear in mind this.”
2025-02-09 · We Study Billionaires · RWH054: Billionaire Brit w/ Terry Smith · IDENTIFIED FROM THE TRANSCRIPT
“I mean, an awful lot of it comes down to just knowing. It's like there aren't good airlines. I mean, people say, what about Ryan? Every rule has an exception somewhere out there. But on the whole, there aren't any. And if you look at the last 20 years of data, it's lost something like 5% versus its cost of capital on average every year. It's a machine for destroying value. That's just what the statistics tell you. So that's what analyzing the statements will tell you, either in aggregate or individually. Then you go, I wonder why they are a bad industry. So I'll think for a moment. Every single major factor involved in those companies is outside their control. This is another thing to look for. You're looking for companies which have certain things they can control and work on the things they control. They don't worry about the things they can't control. They work on the things they can control. Airlines can't control the frequency with which you fly. Now, load factors vary, right? They can't control.”
2025-02-09 · We Study Billionaires · RWH054: Billionaire Brit w/ Terry Smith · IDENTIFIED FROM THE TRANSCRIPT
“You're avoiding Munga is great, I think, because he does have this idea that if you invest in good stuff, you'll be all right. Roughly speaking, you could take our entire investment philosophy and boil it down land. If you've got good stuff, you'll be all right. That's it. That's it. You might not be the best fund, or you might not outperform everybody in the world, but you'll be all right. Good stuff. Sorry, I interrupted you in the middle of talking about Manga”
2025-02-09 · We Study Billionaires · RWH054: Billionaire Brit w/ Terry Smith · IDENTIFIED FROM THE TRANSCRIPT
“And no doubt you can communicate to the many. You could broadcast. That's a bit different, isn't it? Then along came somebody who said, never mind that, I've got this thing. You can look at each other while you're communicating. You have television. You can have either video or you can have broadcast television. Then along came the internet. So if you're involved in this, it's been a hell of a lot of change already, hasn't there along the way. So recency bias is something I think that a lot of people suffer from. It's tempting to think that we've got more change now than we've ever had before. I'm not utterly convinced.”
2025-02-09 · We Study Billionaires · RWH054: Billionaire Brit w/ Terry Smith · IDENTIFIED FROM THE TRANSCRIPT
“And we've got Microsoft, and we've got some stuff that's more recent. But before we alight upon the idea that there's never been more change in this, bear in mind idea history degree. And you need to think back to earlier periods in history. You're sure that this is the most change we've ever seen because if you were involved in the communications business across the last sort of two centuries, you would have started in the telegraph business where they put up wires typically alongside railway lines and you sent Morse code. That's how you communicate it, right? And then somebody came up with a means of having a microphone so you could have the voice. So we attached a microphone to the wires. Now we could talk to each other. And then somebody invented radio. And after we'd had radio in place for a while, two things evolved from that. One was we could talk to each other without being connected by a wire. That's different, isn't it? So, you know, ships at sea and people who are traveling or could communicate.”
2025-02-09 · We Study Billionaires · RWH054: Billionaire Brit w/ Terry Smith · IDENTIFIED FROM THE TRANSCRIPT
“Those sectors, there are certain competitive advantages that those sectors and the leading companies within it enjoy. It's what Buffett calls the moat, their defensive mechanism. How do they keep those sharp elbows that keep you out, right? Because we can all look at Coca-Cola and see it's got good returns, but how are we going to get in there? And we've got to get past PepsiCo and Dr. Pepper first before we even get a crack at them. And they've got this means of defending themselves. There's no doubt that we are in an era where there's been change. And we can sort of look around us and go, well, in the time that I've been in business, we've seen change in terms of computing and the internet and mobile telephony. And social networks. And maybe we're seeing something now in AI, maybe, maybe not. I don't know. And it is a period of change. And there's no doubt that you've got to be alive to it. And I think we are alive to it. Not everything that we've got was founded in 1920. We've got method.”
2025-02-09 · We Study Billionaires · RWH054: Billionaire Brit w/ Terry Smith · IDENTIFIED FROM THE TRANSCRIPT
“Case, it's a machine for this string value. And then they show you the sectors. Let me tell you, almost every year they do it, you go, all right, so the good companies, the ones creating value are the consumer staples, consumer discretionary, healthcare, information technology. And then what's all the bad stuff? Oh, it's banks, real estate, insurance, heavy engineering and manufacturing, mining and minerals, oil, gas, and transport, in particular airlines, are all bad. Every dog has its day, right? There will be a year somewhere in the cycle where mining is good or airlines are okay. Of course there is, you know, but good things don't become bad and bad things don't become good, right? So that's the first point is on the whole, we're not suddenly going to find all the good companies will become bad companies, all the bad companies. It persists. And the reason it persists is because of competitive advantages.”
2025-02-09 · We Study Billionaires · RWH054: Billionaire Brit w/ Terry Smith · IDENTIFIED FROM THE TRANSCRIPT
“No, but mostly winners keep on winning. This will come the way the world is. The Stern Business School in New York produces a table, I think they produce it annually, and it's good or bad companies. And what they have is companies bisexual. And the airlines, thousands of companies. So they have the sectors consumer stables and consumer discretionary and pharmaceuticals and healthcare and mining and minerals and banking, all these sectors, hundreds and hundreds of companies in each one. And they do a very simple calculation of whether a company creates or destroys value for the year that they're looking at. But they've got the data over many years. And what they look at is the return on capital employed, you know, the buffet thing that he focused on in 79 that we focus on, a guess at the weighted average cost of capital. People get their knickers in a terrible twist about whether it's a guess, right? The exact number doesn't matter. And so they take off away average cost of capital and come, is it taking in money away average cost of capital and making a positive spread, in which case it's creating value? Or is it making a negative spread in which”
2025-02-09 · We Study Billionaires · RWH054: Billionaire Brit w/ Terry Smith · IDENTIFIED FROM THE TRANSCRIPT
“Time you've completely ignored us, you're ignoring us now, and we don't think you should. And you're treating other people who arrive in the last five minutes better than us. So we'd really like you to focus and we will become competitive. Like, you know, they'd say, oh, we've got an active investor and we invited him on the board. And it's like, great, you know. But I don't want to go on the board. I would turn it down if they ask me, not that it's ever particularly likely. But why are you doing that? Trying to get them to the point. And we, look, we can get you managements who will give you, I don't think you want it, probably, but we can get people management who will give us a reference to say, Punsmith turned up. They did all this in talking about our business. They bought a big stake. Then we had an activist who said, we've got to cut costs and we've got to split the business. We've got to do this. And not only did they vote against that, but they talked to the proxy voting agency and said, I think these people are wrong. What are they going to do is injure this business? I mean, we will actually stand alongside them and fight for the business if we think that someone's doing something wrong in that regard. So far from being...”
2025-02-09 · We Study Billionaires · RWH054: Billionaire Brit w/ Terry Smith · IDENTIFIED FROM THE TRANSCRIPT
“Usually it's to try and start with going down the route of trying to get them to talk about how they view it without giving them too many clues, as it were, right? So something like, well, how do you decide your priorities? Don't say anything beyond how you could do this or you could do that. You could measure this. No, no, don't give them a roadmap. Just leave it as obviously you want to point them down the route of talking about this, but you want to point them down the route of talking about it with as few signposts as possible to see whether they've actually got a framework. And sometimes they haven't got a framework. I mean, pombative, it may surprise, we're not usually all that combative. I mean, we are with people who we think in the end are trying to dup us or just not listening to what we're trying to tell, particularly if we own quite a lot of their shares. You know, we will become like we did with Unilever in the end. It's kind of like guys, we will become competitive because we've only shares for a long time.”
2025-02-09 · We Study Billionaires · RWH054: Billionaire Brit w/ Terry Smith · IDENTIFIED FROM THE TRANSCRIPT
“So they go, Well, actually, I mean, I've met managers, I've done projects for managers in public companies over years where they say, my stock's undervalued. Now you're busy acquiring things. Yes, yes, buying lots of things. Why don't you buy your own stock? Why would I do that? I'd shrink. But surely the company you know best is not the companies you're acquiring, it's the one you've already got. You must know that pretty well, yeah? And you're telling me you think it's undervalued. By the way, I've checked and I think you're right. Why don't you buy those? You're looking for people who've got an honest and intelligible approach to that as well. So great financials. How do they do it? People who are honest and straightforward and intelligent in their application of this. That's it.”
2025-02-09 · We Study Billionaires · RWH054: Billionaire Brit w/ Terry Smith · IDENTIFIED FROM THE TRANSCRIPT
“Traditionally, what most people mean by that is they are meeting with them, and how did they come across? I've met people who can present brilliantly, but are bad managers and people who can't present to save their lives who are very good managers. No, no, no, no. Let's get to the nitty gritty of talking to these people and ask them all the usual questions, what's happening here and what's happening in that product and in this region. What we really want to know is every year you have this company that produces this return. These profits and cash flows arrive, right? How do you decide whether to give it back in a dividend, buy back shares, invest in the business, or buy things, right? Those are your four basic choices. Two of them are obviously subsets of one, which is giving money back. How do you decide between those? And we're looking for people who've got a grasp of how that works and what they do, which is honest, and that matches something like the way that we think.”
2025-02-09 · We Study Billionaires · RWH054: Billionaire Brit w/ Terry Smith · IDENTIFIED FROM THE TRANSCRIPT
“80%, 120%. There are companies that make more than 100% of profits in cash, usually by the method of paying people more slowly than they get paid. And that's beneficial fairly obviously because cash is the only thing in the end you can pay the dividend with various things. So we look at a raft of financial metrics for these companies. And every year we give that to people in terms of our portfolio and how it looks and how it looks against the indices and so on and so forth. And then, as I say, we start looking at things like, well, what do they do? So it all looks good. Do they have brands? Do they have control of distribution? Do they have intellectual property? Do they have an installed base of software or equipment that they service and sell spares and so on and upgrades to? How do they do this? We've got to have an understanding. How do they get to those numbers? What drives them to get to those numbers? And then we look at things like the management. They're not in the sense of, are they good managers or bad managers?”
2025-02-09 · We Study Billionaires · RWH054: Billionaire Brit w/ Terry Smith · IDENTIFIED FROM THE TRANSCRIPT
“Access to capital either by you sending me more or me retaining your earnings and you ignore the return on capital employed I'll generate earnings growth for you at lower and lower returns which plenty of companies have done over time see Tesco for details right it's like oh it's a disaster right so we look at return on cap and employee we look at gross margins we look at the difference between sales revenues and cost of goods sold they mark things up by because companies take stuff in they take in components ingredients services labor and they put a markup on it right and again in normal life you go into a shop you can imagine them having a markup well all companies have that markup what is it and the size of that tells you a lot of things it tells you about their pricing power their brand strength it tells you about their defenses against inflation if the cost of goods goes up we obviously look at profit margins but most people do we look at cash conversion and what percentage of the profits arrive in cash you know is it 100”
2025-02-09 · We Study Billionaires · RWH054: Billionaire Brit w/ Terry Smith · IDENTIFIED FROM THE TRANSCRIPT
“Looking, I mean, financial terms, we're looking for a higher return on capital employed. Let's start with that. Warren Buffett said it's the single most important measure of performance in his 1979 annual report. I thought it was. And he seems to have done quite well since then. So probably we should listen a bit, you know. And it is because if you invest with me, you want to know what return you're going to get. You're going to put your money in the bank. You want to know what return you buy a bond. You want to know what interest rate yield you're going to get. When people invest in companies, ignore that. No, you're buying your portion of their capital. What return do they get on that capital? That's question number one, because there's a great Charlie Munger quote, which is over the long term, the performance of your shares, if you hold them for the long term, will start to gravitate towards the return that the company generates. And he's not putting forward a theory here. It's a fact. And so we look at return on capital employed. And people look at all kinds of other earnings, growth and so on. If you're prepared to give...”
2025-02-09 · We Study Billionaires · RWH054: Billionaire Brit w/ Terry Smith · IDENTIFIED FROM THE TRANSCRIPT