YouSaid · the spoken record

Toby Rodes

lines on the record: 71
first: 2024-09-23
most recent: 2024-09-23
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

“Exists in Japan in the middle markets. It's basically a US private equity playbook that exists for weird quirks of how the Japanese financial system evolved, but exists in domestic public markets.”
2024-09-23 · Capital Allocators · Toby Rodes - Unlocking Value in Japan (EP.407) · IDENTIFIED FROM THE TRANSCRIPT · source
“We drive Honda cars. Your neighbor has a Toyota. Your kids play on a Nintendo Wii. We grew up on Game Boys. The service on Jal is the best service you can possibly get on an airplane. The product focus in Japan is tremendous. It's a rich country. It's a high trust culture. All these things that intrigue my grandfather are still true. But the capital markets are still woefully under optimized. The case for Japan is quite simple. The US has gone through tremendous financialization and financial optimization over the last 30 years. We've seen the private equity story play out in the US where the story was quite simple. High quality businesses, largely middle cap companies bought on very low multiples deliver superior returns. Will I submit to you today that that biggest pool of high quality businesses on low multiples, great entry points?”
2024-09-23 · Capital Allocators · Toby Rodes - Unlocking Value in Japan (EP.407) · IDENTIFIED FROM THE TRANSCRIPT · source
“So before diving into how you're doing that, I'd love to bridge that with talking about the case for Japan today. How do you put this opportunity set today in the context of what you've seen over your career?”
2024-09-23 · Capital Allocators · Toby Rodes - Unlocking Value in Japan (EP.407) · IDENTIFIED FROM THE TRANSCRIPT · source
“Build a company specifically to go after a part of the Japanese market that was largely misunderstood, neglected, too cheap for a value manager to ignore.”
2024-09-23 · Capital Allocators · Toby Rodes - Unlocking Value in Japan (EP.407) · IDENTIFIED FROM THE TRANSCRIPT · source
“So, I told you about my five year cycles, and I'd been through three of them at GMO, learn how to put together a portfolio, learn how to think about that in the context of macro events, finally learn how to take a portfolio that I'd inherited that had ultimately 77 stocks and turn that into a high conviction portfolio of just 13 names, how to really take constructive risk. And when I mastered those three five-year cycles, I saw on the horizon that Japan was finally waking up from a 30-year slumber, that a governance breeze was blowing, and that true to form what Japan didn't understand, and that I could arbitrage into this market was accountability and governance. But Kaname capital was really the distillation of everything I'd learned at GMO and why I wanted to purpose.”
2024-09-23 · Capital Allocators · Toby Rodes - Unlocking Value in Japan (EP.407) · IDENTIFIED FROM THE TRANSCRIPT · source
“Independent thinking, complete ownership of your idea from start to finish, no committees, everything from sourcing your own ideas, leveraging quant, but not relying upon quant, managing the prices where you wanted to buy literally being the trader of your stock. So you owned every piece of the outcome of your sleeve in the portfolio.”
2024-09-23 · Capital Allocators · Toby Rodes - Unlocking Value in Japan (EP.407) · IDENTIFIED FROM THE TRANSCRIPT · source
“GMO was a great. Started there ultimately in 2005 and was dedicated to the Japan product and learned a lot of good habits at GMO”
2024-09-23 · Capital Allocators · Toby Rodes - Unlocking Value in Japan (EP.407) · IDENTIFIED FROM THE TRANSCRIPT · source
“Research in Japan is to be a cheerleader, nothing more, nothing less, that people didn't want your opinion they wanted stocks to go up. I started writing cell notes, drafts of them, and those drafts would make it on the desks of certain powerful people, and I'd be told that if you really valued your opinion, you might think about moving to the buy side. Ultimately, that was a great career move, and that was the end of my sell side experience.”
2024-09-23 · Capital Allocators · Toby Rodes - Unlocking Value in Japan (EP.407) · IDENTIFIED FROM THE TRANSCRIPT · source
“I believe in five year cycles, and my career in Japan has at first been figure out the language, figure out how to basically be engaging and make friends and just become part of the group. It's a group tribal society. So you have to figure out how to get inside. So that first five years was spending time and being part of the KO rowing team and living in the rowing dorm and learning how to become bilingual, bicultural, and code switch, learning how to be Japanese, if you will. And then when I transitioned to the professional career, what I learned is that they didn't understand valuation largely in the market and that I was able to provide that. My next bridge too far was when I thought, well, people really want my opinion. The role of an investment bank, especially a research analyst, is to tell people when to buy and sell. I tried to write sell notes. And that's when I learned that the role of”
2024-09-23 · Capital Allocators · Toby Rodes - Unlocking Value in Japan (EP.407) · IDENTIFIED FROM THE TRANSCRIPT · source
“Is to figure out what Japan needs and figure out how to bring that into Japan and be a bridge and arbitrage those skills. So that has served me well for 30 years, always figuring out what Japan can't really quite see around the corner and bring that into Japan”
2024-09-23 · Capital Allocators · Toby Rodes - Unlocking Value in Japan (EP.407) · IDENTIFIED FROM THE TRANSCRIPT · source
“The fact that the domestic investing complex in Japan, whether it was the pension funds or even their own trust banks, they knew everything about, for example, dokomo when it was listed in 1998. They knew how many base stations there were. They knew the age of everyone on the board. They had no idea how to value a growth company. They had never thought about what free cash flow was. Believe it or not, in 1998, I was the first published discounted free cash flow model. Despite being a foreigner and having passable but not perfect Japanese at the time, I had 300 meetings with the entire domestic investing public. And the reason was they all wanted my floppy disc of a discounted cash flow model. They were being told that they should value Dokomo on eleven times earnings and a two percent dividend yield. This is when a light bulb went off for me that my job”
2024-09-23 · Capital Allocators · Toby Rodes - Unlocking Value in Japan (EP.407) · IDENTIFIED FROM THE TRANSCRIPT · source
“I realized how markets were organized in Japan, so you could figure out who the winners were going to be. Winners are chosen in Japan. That competition is managed. I had the good fortune of starting my career in the telecom sector. What made that sector different is at the time I started, there were really only four companies, an international company, KDD, a domestic company, NTT. They're recently spun out cellular business, doco, and a third new market entrant that was introduced to finally mix up and create competition. And in this, the rules of competition were very familiar to me, and I understood how this market would be organized, and it made it very easy for me to model and be helpful to foreign investors thinking about allocating capital to Japan.”
2024-09-23 · Capital Allocators · Toby Rodes - Unlocking Value in Japan (EP.407) · IDENTIFIED FROM THE TRANSCRIPT · source
“There's a curious part of that where you're understanding how this is an insider's game as you're on the ground. I wouldn't think that would necessarily lend itself to, oh, we're going to invest in these companies as an outsider Was that thought process as you became a sell site analyst?”
2024-09-23 · Capital Allocators · Toby Rodes - Unlocking Value in Japan (EP.407) · IDENTIFIED FROM THE TRANSCRIPT · source
“The tools for understanding how Japanese markets work. I took that knowledge eventually to being a sell side equity analyst.”
2024-09-23 · Capital Allocators · Toby Rodes - Unlocking Value in Japan (EP.407) · IDENTIFIED FROM THE TRANSCRIPT · source
“Very clear that only Japanese products were going to reach Japanese consumers. I deeply studied this event because Kodak had been operating and missing this market for years and I needed to show what was happening. So it took me way back into the 60s and 70s. My grandfather's era and I saw just the collaboration between the corporate entity and the government and how they were collaborating to thwart foreign capital and foreign product entry into Japan. That's when I realized the Japanese capitalism is fundamentally different. It is designed for insiders. It is designed to benchmark domestic products against foreign products, figure out how to keep foreign products out, how to keep foreign capital out, how to keep things uniquely Japanese and compete intensely in third markets outside of Japan. It's a very unique developmental capitalism and with that I realized that I accidentally learned”
2024-09-23 · Capital Allocators · Toby Rodes - Unlocking Value in Japan (EP.407) · IDENTIFIED FROM THE TRANSCRIPT · source
“Great question. Japan seems immediately familiar when you touch ground. There's Kentucky Fried Chicken, there's McDonald's, there's pizza, but the pizza comes with corn and squid on it. The Big Mac is the third best-selling product in Japan, behind the Teriyaki burger. So it seems familiar, but in fact, as you get to know it, all of a sudden, you're really surprised at how different things actually are. I'll fast forward and tell you when I really figured out how Japan is different is with this legal background I was hired by U.S. law firm and brought back to the US where I was the back office of the U.S. Trade Representative and a big trade dispute, Kodak versus Fujifilm. What was at stake was figuring out why Kodak couldn't reach the Japanese consumer. How had Fuji Film created a sanctuary market? The answer was through very complex distribution schemes, coordination with suppliers.”
2024-09-23 · Capital Allocators · Toby Rodes - Unlocking Value in Japan (EP.407) · IDENTIFIED FROM THE TRANSCRIPT · source
“Professor Tamara was telling me very clearly that I was mastering an interesting policy area that unless I layered Japanese in familiarity with the culture and the way things work in Japan, it ultimately would be interesting, but not really a career. And with that, I was very lucky to get a two years all expenses paid scholarship from the Rotary Foundation to study first the language and then to study law in Japan in Japanese. That's when things really went into high gear. I got off the plane in 1993 with a Canondale bicycle, a small amount of clothes, and a strong sense of adventure completely committed myself to studying the language.”
2024-09-23 · Capital Allocators · Toby Rodes - Unlocking Value in Japan (EP.407) · IDENTIFIED FROM THE TRANSCRIPT · source
“Time in was graduating from Haverford College. Going to Washington, D.C. and starting out at the Brookings Institution My first boss was a visiting scholar from Japan. Is 1990, 1991. Cast Japan had reinvented capitalism.”
2024-09-23 · Capital Allocators · Toby Rodes - Unlocking Value in Japan (EP.407) · IDENTIFIED FROM THE TRANSCRIPT · source
“Is that I bounced off of Japan twice before I got there? I was supposed to go in high school. I shattered my kneecap on the soccer field. and couldn't go Red Hendrick Smith book, The Russians, and I got very interested in Russia. Tried studying Russian, and the Russian teacher. Me And that's when I learned that Russian is poetry and Japanese is math. That I've got a faculty and facility for both math and Japanese. So I'm very grateful for those two bouncing off of Japan initially and allowing me to go deep. Third”
2024-09-23 · Capital Allocators · Toby Rodes - Unlocking Value in Japan (EP.407) · IDENTIFIED FROM THE TRANSCRIPT · source
“It was my grandfather. Grandfather, an industrialist in Cincinnati. Was invited to Japan in the late 60s to help rebuild the Japanese glass and steel industries. Made high temperature industrial bricks. Only two companies in the world that Produce bricks that could go to 1,400 degrees. That he made the four day trip to Japan in 1968. After that, he would go almost every other year and pass through Washington, D.C. where I grew up. Tell me stories about the other side of the world. Being a white guy from the Midwest. Seem very interesting to me by making up Interesting stories about how it was polite to burp at the dinner table. Was a gardener Was a Level At which he communicated with Japanese people well beyond the language. That made a strong impression on me.”
2024-09-23 · Capital Allocators · Toby Rodes - Unlocking Value in Japan (EP.407) · IDENTIFIED FROM THE TRANSCRIPT · source
“My guest on today's show is Toby Rhodes, the co founder and managing partner of Kaname Capital, a value and quality-oriented manager of Small Cap Japanese equities. Our conversation covers the case for Japan and why this time is different. We discuss Toby's deep-rooted fascination with Japan, his education in Japanese culture, and transition to investing on the sell side and at GMO. We then turn to the past false starts of Japanese activism, recent changes in corporate governance, and Kaname's process to take advantage of the opportunity. Lastly, we touch on value traps, the carry trade, and the potential for private equity activity in a new era of Japanese corporate stewardship.”
2024-09-23 · Capital Allocators · Toby Rodes - Unlocking Value in Japan (EP.407) · IDENTIFIED FROM THE TRANSCRIPT · source