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Conviction Investing: Masters in Business with Bill Miller IV · Masters in Business

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  Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. This is Masters in
• 0:12
  Speaker 1: Business with Barry Ritholts on Bloomberg Radio.
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  Speaker 2: This week on the podcast, I have yet another extra
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  Speaker 2: special guest, Miller Value Funds, Bill Miller the fourth. He
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  Speaker 2: is the son of Bill Miller, the third, fascinating investor,
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  Speaker 2: portfolio manager, and World Series of poker player. They have
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  Speaker 2: a very unique approach to value. It's not your traditional
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  Speaker 2: just buy him cheap. I thought this conversation was fascinating
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  Speaker 2: and I think you will also with no further ado,
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  Speaker 2: my conversation with Miller Value Funds.
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  Speaker 3: Bill Miller, thanks for having me. It's great to be here.
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  Speaker 2: So I want to talk about your investment philosophy, what
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  Speaker 2: you're doing at Miller Value today. But let's roll back
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  Speaker 2: a little bit. Beforehand. You get a degree in economics
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  Speaker 2: from Toughts and then an MBA from Dartmouth Talk School
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  Speaker 2: of Business. Was investing the original career plan.
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  Speaker 3: No, it wasn't the original career plan. You know. When
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  Speaker 3: I was growing up went to a small private boys
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  Speaker 3: school in Baltimore, Maryland. Never really knew what I wanted
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  Speaker 3: to be when I grew up. But when I pointed
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  Speaker 3: out to my parents. They said, we'll just consider school
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  Speaker 3: as your job, and the harder you study, the more
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  Speaker 3: options you'll have down the line, and it'll help you
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  Speaker 3: figure it out.
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  Speaker 2: So that sounds like pretty good advice.
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  Speaker 3: I followed it. It did well academically in school. So
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  Speaker 3: when I went to Toughts, I think the primary concern
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  Speaker 3: was somewhere where I could actually play baseball. So growing
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  Speaker 3: up with a huge Orioles fan, that was something that
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  Speaker 3: my dad and I often did together. He was my
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  Speaker 3: coach and little league something I'm doing now today for
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  Speaker 3: my son. Sports teach you a lot about being on
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  Speaker 3: a team, about how to operate, how to internalize which
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  Speaker 3: you can and control what you can and not focus
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  Speaker 3: on the rest. So learned a lot from that.
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  Speaker 2: Did you play baseball in college?
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  Speaker 3: Yeah, but I wasn't very good, so I learned that
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  Speaker 3: pretty quickly. I played.
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  Speaker 2: Difference between the guys who are good and really good
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  Speaker 2: is so tiny, Just like a little wood on the
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  Speaker 2: bat once or twice more a week and you're in
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  Speaker 2: a different tier exactly, Right's fascinating.
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  Speaker 3: Yeah, And you know, I probably deluded myself for a
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  Speaker 3: while about how good I could be. But I also
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  Speaker 3: probably didn't focus on the right things, and knowing what
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  Speaker 3: I know now about how to get better and improve
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  Speaker 3: with things, I could have been much more systematic about
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  Speaker 3: it than I was.
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  Speaker 2: Huh, So you start your career at Mackenzie Why consulting?
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  Speaker 2: What led to that?
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  Speaker 3: Yeah? Well, so I interned for my dad's group in college,
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  Speaker 3: loved it, learned a lot. But then you know, on campus,
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  Speaker 3: scrooting came along and McKinsey was one of the names,
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  Speaker 3: and I just applied to it, did a little work
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  Speaker 3: on it, and made it through that interview process. It's
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  Speaker 3: pretty rigorous, and I got an offer from McKenzie and
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  Speaker 3: I said, hey, Dad, I love being with your group.
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  Speaker 3: Investing is a lot of fun. You know, what would
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  Speaker 3: you do if you were me? And he said, well,
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  Speaker 3: you can always tell McKenzie you can always come back
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  Speaker 3: and work for me. But if you tell Mackenzie no,
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  Speaker 3: you'll never have a chance to work there again. So
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  Speaker 3: it was this concept of optionality again. And also there
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  Speaker 3: was he knew and I didn't know at the time,
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  Speaker 3: but they placed an immense amount of focus on professional development,
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  Speaker 3: and so that was a really valuable place to spend
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  Speaker 3: the first three years of my career. So I was
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  Speaker 3: working on a huge variety of consulting projects, mainly Actually
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  Speaker 3: the job I had there now I don't know if
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  Speaker 3: it exists because of AI. So what I was doing
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  Speaker 3: was remotely supporting teams on research efforts and deep dives
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  Speaker 3: on stuff which now you just ask chat GBT about
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  Speaker 3: and he probably does a better job summarizing everything I
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  Speaker 3: could possibly do.
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  Speaker 2: And you know, assuming it's accurate, which is always a
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  Speaker 2: little bit of an ef.
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  Speaker 3: Right, that is a big if for sure. Yeah, focusing
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  Speaker 3: on primary sources is still a critical skill that I
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  Speaker 3: think a lot of people under emphasis.
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  Speaker 2: What you take from your years consulting that showed up
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  Speaker 2: and as helpful as an investor.
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  Speaker 3: You know. One of the things this might surprise you
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  Speaker 3: less so about the data driven nature, because my dad's
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  Speaker 3: a data driven thinker and thinking quantitatively has always been
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  Speaker 3: in my wheelhouse. But the thing that I learned in
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  Speaker 3: McKenzie more than anywhere else with me to focus on
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  Speaker 3: client service and how to interact with people, how to
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  Speaker 3: do the subtle things that show you know somebody else
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  Speaker 3: as the client. In finance, you know, when you're managing money,
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  Speaker 3: it's very hard to differentiate yourself and that you know
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  Speaker 3: Ken French, who was a professor of mine at.
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  Speaker 2: Famous Farm of French Factor model at Dartmouth.
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  Speaker 3: Sure you got exactly. One of the things he imparted
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  Speaker 3: on us was how long does it take to know
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  Speaker 3: if a money manager is actually any good? And the
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  Speaker 3: answer is from us, a statistically significant basis longer than
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  Speaker 3: any money manager's career.
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  Speaker 2: Right, So I'm going to say ten years, twenty.
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  Speaker 3: Years, it's twenty plus for to see if it's statistically significant, right,
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  Speaker 3: So you have to be doing other things. It's like
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  Speaker 3: we were talking about before we came in here. Content's
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  Speaker 3: a big focus, right, That's a way to differentiate yourself,
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  Speaker 3: the way you communicate with clients, getting back to them quickly.
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  Speaker 3: All of these things are really important. And I learned
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  Speaker 3: those at Mackenzie. And I'm not sure I would have
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  Speaker 3: learned those to the same extent if I had just
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  Speaker 3: directly joined my dad's firm. So that might be a
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  Speaker 3: surprising answer, but it is a no.
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  Speaker 2: It's really really interesting. So Mackenzie was a solid place
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  Speaker 2: to get grounded. What led to the pivot to investing
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  Speaker 2: LADO seven?
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  Speaker 3: Wait? Yeah, so in Mackenzie we were effectively handing over
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  Speaker 3: analyses to clients and then leaving and moving on to
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  Speaker 3: the next analysis. And it occurred to me that if
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  Speaker 3: you actually wanted to build any equity in your analysis
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  Speaker 3: and what you were doing, you had to actually take
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  Speaker 3: a real stake in something. And so that made me think, Okay,
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  Speaker 3: you know this is it'd be a great time to
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  Speaker 3: pivot from what I was doing at Mackenzie to my
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  Speaker 3: dad's side of things, where that's exactly what you're doing
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  Speaker 3: all day, every day, excuse me. And then I also
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  Speaker 3: during college I a liking to poker and so played
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  Speaker 3: a lot in no limit hold and back then Poker
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  Speaker 3: Stars was kind of an a legal gray area, and
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  Speaker 3: so I played a lot online and I saw a
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  Speaker 3: lot of similarities between what my dad did poker analytical
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  Speaker 3: edge in terms of thinking quantitatively at Mackenzie, and it
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  Speaker 3: all kind of came around to moving in that direction.
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  Speaker 2: So, speaking of your father, how did growing up in
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  Speaker 2: the Bill Miller household influence how you look at risk
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  Speaker 2: and reward at investing at how big of an influence
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  Speaker 2: was he on your initial philosophy?
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  Speaker 3: I think he's most of it. It's hard for me
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  Speaker 3: to specifically say A, B and C because it was
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  Speaker 3: as much learning from watching him and how he operated.
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  Speaker 3: So Number one, he was always always had a stack
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  Speaker 3: of research and was always going through content, always looking
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  Speaker 3: for new perspectives. He's a relentless truth seeker. And I
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  Speaker 3: think that's ultimately what we're doing his investors is trying
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  Speaker 3: to separate where the truth is from where the perception
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  Speaker 3: is around what's going to happen. And the bigger the gap,
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  Speaker 3: the where you want to place a bet.
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  Speaker 2: That variant perception is really important, is it exactly, especially
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  Speaker 2: when that gap gets bigger and bigger.
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  Speaker 3: Yeah, and especially if there's a you know, a margin
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  Speaker 3: of safety there to protect you on the downside. So
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  Speaker 3: relentless truth seeking. And the other thing is, you know,
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  Speaker 3: there were no shortcuts for him. There's no there's no
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  Speaker 3: substitute for actually putting in the time to going through
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  Speaker 3: that content all the time and being in front of
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  Speaker 3: your machine all day and just time is the ultimate
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  Speaker 3: resource and constraint for everyone. And so thinking in blocks
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  Speaker 3: of time and thinking how to maximize your productivity per
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  Speaker 3: unit of time, I think is something that I took
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  Speaker 3: away from.
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  Speaker 2: Him really really interesting. So going back to the family business,
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  Speaker 2: that's a pretty loaded concept for a lot of people.
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  Speaker 2: What was it like first going back to work with
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  Speaker 2: your father and then becoming the controlling owner of Miller
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  Speaker 2: Value Partners.
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  Speaker 3: It was fantastic because we were a small group at
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  Speaker 3: LEG for a good period of time, probably from twenty
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  Speaker 3: thirteen or twenty fourteen until we split off and went independent,
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  Speaker 3: and I think it was twenty nineteen or so. So
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  Speaker 3: got to work with my dad very closely a lot,
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  Speaker 3: you know. But at the same time, one of the
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  Speaker 3: things I love about it is the market doesn't really
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  Speaker 3: care what he did or didn't do, and ultimately, now
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  Speaker 3: that I'm in charge of the portfolios, it'll hinge upon
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  Speaker 3: my decision making more so than what he did, and
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  Speaker 3: so it's on me to now take everything I've learned
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  Speaker 3: and run with it and do what we can do.
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  Speaker 2: Was your father a poker player? How did you find
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  Speaker 2: your way into that?
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  Speaker 3: No, he wasn't a poker player. It was when Chris
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  Speaker 3: Moneymaker won the World Series. I don't know if you remember, sure,
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  Speaker 3: I think it was maybe two or.
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  Speaker 2: Three big funny glasses.
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  Speaker 3: And he was an accountant actually, and so you know,
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  Speaker 3: he stressed a lot of quantitative decision making and the
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  Speaker 3: other thing I actually looked at coming out of tuck
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  Speaker 3: was baseball operation stuff, because moneyball was a you know,
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  Speaker 3: the whole analytical side was just coming around then. And
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  Speaker 3: you know, I know you like to talk about mistakes,
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  Speaker 3: but I think of specifically that recruiting process, my attitude
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  Speaker 3: towards it, and just some mistakes I made there.
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  Speaker 2: So well, we seem to learn more from our failures
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  Speaker 2: than we do from our successes because we don't know
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  Speaker 2: if our successes were the result of good fortune or skill.
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  Speaker 2: If it takes twenty years to figure out which it is,
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  Speaker 2: you're going to obviously learn more from the errors. Hey,
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  Speaker 2: we know this was a bad choice, that's right, Or
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  Speaker 2: was it a good choice with a bad outcome?
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  Speaker 3: Well, I think in this case it was a you know,
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  Speaker 3: the outcome was good because it was ultimately where I
• 9:52
  Speaker 3: was probably looking to wind up. But at that time
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  Speaker 3: I was thinking, I want to do baseball. Baseball baseball,
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  Speaker 3: you know I mentioned earlier I wasn't good enough to play.
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  Speaker 3: I wanted to sort of use my analytical talents to
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  Speaker 3: our talents, my analytical background and training to go into
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  Speaker 3: the analytical side. And as I went through the recruiting process,
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  Speaker 3: it became very clear that I was jumping through hoops
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  Speaker 3: waiting for callbacks, and it was a very intense process,
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  Speaker 3: and I realized that I was probably gonna be charting
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  Speaker 3: pitches in Topeka at the end of it, which to
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  Speaker 3: me didn't seem all that exciting. But in retrospect, if
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  Speaker 3: you want to be in baseball operations, you should do
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  Speaker 3: anything you possibly can to get your foot in the
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  Speaker 3: door of these competitive businesses.
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  Speaker 2: Let me point out a little over a decade ago
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  Speaker 2: a kid became an intern in the NFL and he
• 10:36
  Speaker 2: just won the Super Bowl as head coach. So if
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  Speaker 2: you really love it that much and you that committed,
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  Speaker 2: I'm with you. I can't count pitches in Topeka.
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  Speaker 3: I just right.
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  Speaker 2: I mean yes, especially because you have how many other
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  Speaker 2: people were in turns and they didn't head coach the
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  Speaker 2: Super Bowl winner.
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  Speaker 3: But it's funny because now I see that on the
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  Speaker 3: other side, right, So I get LinkedIn's and messages all
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  Speaker 3: the time. Hey, I'm a really good software analyst. I
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  Speaker 3: want to come and work for you and be a
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  Speaker 3: software analyst. And I'm like, we don't need a software
• 11:07
  Speaker 3: analyst right now. We need somebody that can go get
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  Speaker 3: me a sandwich at lunchtime, you know, like so, But
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  Speaker 3: I understand the perspective too. It's just that I think
• 11:16
  Speaker 3: if you want to become a member of a team,
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  Speaker 3: you have to understand what the team needs and where
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  Speaker 3: you can genuinely help, and it may not always necessarily
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  Speaker 3: align with what you want to do. And I think
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  Speaker 3: that's important to keep in mind.
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  Speaker 2: Huh really really very interesting. So as long as we're
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  Speaker 2: talking about all these career choices, if you were starting
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  Speaker 2: out today, would you follow this a similar path to
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  Speaker 2: what you did previously? Would you go a different rap?
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  Speaker 3: I really like what I'm doing now, and I want
• 11:46
  Speaker 3: to do it indefinitely, so it's hard for me to
• 11:49
  Speaker 3: go back and say I would do something differently because
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  Speaker 3: I'm where I want to be for the long term.
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  Speaker 3: I do think one of the lesser considered paths that
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  Speaker 3: a lot of undergrads don't think about would be actually
• 12:02
  Speaker 3: going into something entrepreneurial. H And I don't mean like
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  Speaker 3: starting a startup that you're trying to scale from zero
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  Speaker 3: to gajillion dollars over the next year, right, But that's
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  Speaker 3: what people tend to think of because that's where all
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  Speaker 3: the returns look like they are In reality, I think
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  Speaker 3: potentially scaling a small services business, you know, whether that's powerwashing,
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  Speaker 3: home cleaning, just things that where you can get your
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  Speaker 3: arm around the fundamental service and scale that and make
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  Speaker 3: it bigger is potentially a more a safer risk adjusted
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  Speaker 3: way to a big outcome than people consider.
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  Speaker 2: Just because you're learning a business from the ground up
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  Speaker 2: and customer relations and all those other things.
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  Speaker 3: Yeah. Well, you know, even in our business, it takes
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  Speaker 3: time to build a track record, it takes time to
• 12:44
  Speaker 3: build the assets, and so anything you do where you're
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  Speaker 3: gonna have a good outcome in the long run just
• 12:48
  Speaker 3: takes repetitive effort and the right focus. And so sometimes
• 12:53
  Speaker 3: the learning around something that you can get your arms
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  Speaker 3: around can be easier than the learning around to software
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  Speaker 3: development or you know, scaling a big fund or things
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  Speaker 3: like that.
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  Speaker 2: So really really interesting. Coming up, we continue our conversation
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  Speaker 2: with Bill Miller, the Fourth Miller Value Fund's chief investment officer,
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  Speaker 2: talking about his investment philosophy.
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  Speaker 3: I'm Barry Dults.
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  Speaker 2: You're listening to Masters in Business on Bloomberg Radio. I'm
• 13:34
  Speaker 2: Barry Ridults. You're listening to Masters in Business on Bloomberg Radio.
• 13:38
  Speaker 2: My extra special guest today is Bill Miller. He is
• 13:42
  Speaker 2: the chief investment officer and portfolio manager of Miller Value Fund,
• 13:47
  Speaker 2: where he works with his famous father, Bill Miller the Third.
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  Speaker 2: So let's talk about your investment philosophy separate from your dad's,
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  Speaker 2: starting with how do you defe f value in a
• 14:02
  Speaker 2: world where a lot of the traditional metrics like price
• 14:05
  Speaker 2: to earnings or price to book seem to have been
• 14:10
  Speaker 2: downgraded somewhat, perhaps they don't fully capture modern intellectual property
• 14:17
  Speaker 2: based business models. How do you think about those?
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  Speaker 3: Yeah, I think you have to have a flexible definition
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  Speaker 3: of value and that if it's just based on accounting figures,
• 14:26
  Speaker 3: you're probably not going to do very well over the
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  Speaker 3: long run. Because if you look at some of the
• 14:30
  Speaker 3: best performing assets stocks of all time, they never look
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  Speaker 3: cheap just because they have such a right tail and
• 14:36
  Speaker 3: they compound with very you know, they're investing all their
• 14:39
  Speaker 3: earnings and they're constantly seeking to grow that edge, and
• 14:42
  Speaker 3: so solely focusing on accounting factors is not a great
• 14:45
  Speaker 3: way to capture long term value or outperformers, although it
• 14:49
  Speaker 3: can be. You know, we have a strategy where whereby
• 14:51
  Speaker 3: by business partner Dan Leisac has this collection of ten
• 14:54
  Speaker 3: or twelve names that look insanely cheap on these metrics,
• 14:57
  Speaker 3: So you can do there's a lot of different ways
• 14:58
  Speaker 3: to skin the cat.
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  Speaker 2: So what are the different thought processs around defining value?
• 15:05
  Speaker 2: So cheap but not broken is obviously what your partner
• 15:10
  Speaker 2: is focusing on. How do you contextualize things like Amazon
• 15:16
  Speaker 2: or in Video or Google which have looked expensive for
• 15:20
  Speaker 2: ten years and have just shot the lights out.
• 15:23
  Speaker 3: Yeah. Well, in the case of Amazon, they started with
• 15:26
  Speaker 3: a very small idea around just selling books online and
• 15:29
  Speaker 3: it was you know, it ended up being this retail
• 15:33
  Speaker 3: juggernaut just because if you look at now that the
• 15:35
  Speaker 3: distribution logistics networks that they've used to fulfill their orders,
• 15:39
  Speaker 3: it's just a it's a network that can't be touched, right,
• 15:42
  Speaker 3: and it's everything store And it depends on the actual scenario. So,
• 15:46
  Speaker 3: you know, one of the things that I've been vocal
• 15:48
  Speaker 3: about now for probably ten years is our view the
• 15:52
  Speaker 3: bitcoin is still a massively undervalue technology. And so that
• 15:58
  Speaker 3: would be one where you probably say, well, it has
• 16:00
  Speaker 3: no cash flows, it's you know, speculative, it's based upon
• 16:06
  Speaker 3: other people's beliefs, and I'd say that's exactly right. It
• 16:08
  Speaker 3: is based upon other people's beliefs, but other people don't
• 16:10
  Speaker 3: haven't yet come around to the view that it is
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  Speaker 3: a functionally superior technology to gold. It's a form of
• 16:16
  Speaker 3: capital governance. I think it requires a lot of different lenses.
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  Speaker 3: Right when we say we have flexible definition of value,
• 16:23
  Speaker 3: you have to approach things from a variety of different perspectives.
• 16:25
  Speaker 3: In this case, one of the reasons I think bitcoin
• 16:27
  Speaker 3: is so interesting and compelling seventeen years in you know,
• 16:31
  Speaker 3: it's gone from this weird technology on the Internet that
• 16:33
  Speaker 3: only criminals used to now it's collateral for loans in
• 16:37
  Speaker 3: our modern day financial system, right, And so what explains that, well,
• 16:41
  Speaker 3: markets explained it to an extent, and that people are
• 16:44
  Speaker 3: increasingly coming around to view it as an interesting place
• 16:47
  Speaker 3: to put money in, an interesting capital governance system. It's
• 16:51
  Speaker 3: totally separate from the fiat systems that everyone has known
• 16:55
  Speaker 3: for their entire lifetimes in multiple centuries before us. It
• 16:58
  Speaker 3: wasn't possible prior to nine or twenty ten when the
• 17:01
  Speaker 3: White Paper came out, And so now you've got this
• 17:04
  Speaker 3: new emerging system of capital governance that I think it's
• 17:07
  Speaker 3: one of the most dynamic areas of finance in general,
• 17:10
  Speaker 3: as a matter of fact. So it's an area I'm
• 17:12
  Speaker 3: very optimistic about over the long term bounce around. It'll
• 17:15
  Speaker 3: be volatile, but I think it's headed to much bigger places.
• 17:19
  Speaker 2: So we're recording this the day after it briefly broke
• 17:23
  Speaker 2: sixty thousand. Are you a buyer of bitcoin at these prices.
• 17:28
  Speaker 3: Yes, So it's a big part of my personal financial situation.
• 17:32
  Speaker 3: In one of our MVPA it's roughly or digital assets
• 17:35
  Speaker 3: collectively are about ten percent of that fund.
• 17:39
  Speaker 2: So we'll talk more about state of markets in a
• 17:43
  Speaker 2: little bit. Let's stay with the concept of Philosophically, this
• 17:47
  Speaker 2: is an interesting technology. I've described this as stop thinking
• 17:52
  Speaker 2: as a unique asset class. I think of it as hey,
• 17:55
  Speaker 2: it's somewhere between Facebook and Google, between Meta and Alphabet
• 18:00
  Speaker 2: as a technology company, which gives it a little more perspective.
• 18:04
  Speaker 2: But at the same time, it came out around the
• 18:07
  Speaker 2: same time as an iPhone, and I would never give
• 18:11
  Speaker 2: up my iPhone. I don't know how I would my
• 18:14
  Speaker 2: train tickets, my plane tickets, my communication, my portfolio, everything
• 18:17
  Speaker 2: I do I do on this. If bitcoin were to
• 18:20
  Speaker 2: disappear tomorrow, it wouldn't affect my life in the least
• 18:24
  Speaker 2: why is it that seventeen years in we're still waiting
• 18:29
  Speaker 2: for this to gain broad usefulness. I'm still waiting for
• 18:34
  Speaker 2: smart tickets that cut out stub hub and those guys,
• 18:39
  Speaker 2: and all sorts of technological uses that I heard about
• 18:43
  Speaker 2: five ten years ago but still haven't happened. What's the
• 18:47
  Speaker 2: response to the skeptics?
• 18:49
  Speaker 3: Well, so, if you look at the introduction of running
• 18:51
  Speaker 3: water in households, it took one hundred years for it
• 18:55
  Speaker 3: to go from possibility to ubiquitous, okay, and that was
• 18:59
  Speaker 3: a clearly better technology than using an out house or
• 19:02
  Speaker 3: boiling water to put it on unite or whatever. So
• 19:07
  Speaker 3: this this is an entirely new idea. And again from
• 19:09
  Speaker 3: my perspective, it's a capital denominator. It's not a numerator,
• 19:13
  Speaker 3: it's a capital denominator. So it's Bitcoin is a denominator
• 19:16
  Speaker 3: for capital. And the reason I think it's so superior
• 19:18
  Speaker 3: to what we've known before is that money the way
• 19:22
  Speaker 3: it works right now, it's ultimately backed by this the
• 19:25
  Speaker 3: threat of state ordered.
• 19:27
  Speaker 2: Violence, standing army and a set of laws.
• 19:31
  Speaker 3: Right, that's right, you know you don't pay your taxes,
• 19:32
  Speaker 3: We'll throw it in a box and lock the key away.
• 19:34
  Speaker 3: I'll throw the key away. But this and if you
• 19:39
  Speaker 3: think about actually around the world, the countries you want
• 19:42
  Speaker 3: to visit, most of them are going to have stability
• 19:45
  Speaker 3: of process and rule of law, right, And the places
• 19:48
  Speaker 3: where that's not the case, there's a much there's a
• 19:51
  Speaker 3: much less distinct, much less a distinction between who controls
• 19:56
  Speaker 3: the ledger and who controls the guns. So the farther
• 19:59
  Speaker 3: apart those two things are the better. So in this case,
• 20:02
  Speaker 3: we now have a distinct ledger entirely apart from any state,
• 20:06
  Speaker 3: and its units can't be controlled by anyone, right in
• 20:09
  Speaker 3: that they're controlled by actual energy. So you need to
• 20:12
  Speaker 3: have energy to crank out a new bitcoin, because that's
• 20:15
  Speaker 3: what the whole mining process is about, right, You verify
• 20:18
  Speaker 3: a transaction. Takes a lot of energy to do that,
• 20:21
  Speaker 3: and in exchange for expending that energy, you get more bitcoin.
• 20:24
  Speaker 3: That's a minor reward, right right. So this is a
• 20:27
  Speaker 3: capital denominator whereby energy input is actually required to create
• 20:31
  Speaker 3: new units. What happens now. What happens now is somebody,
• 20:35
  Speaker 3: you know, a bunch of congress people sign something fed
• 20:38
  Speaker 3: goes and prints money to keep roughly rates roughly in
• 20:41
  Speaker 3: line prices roughly stable, employment, roughly full, and so it's
• 20:48
  Speaker 3: it's there's still some issues with that from a process perspective, right,
• 20:54
  Speaker 3: so they're trying to control the money supply to come,
• 20:56
  Speaker 3: engineer outcomes as opposed to having a fair set of
• 21:00
  Speaker 3: value that we all agree upon. Right, this is a
• 21:03
  Speaker 3: valuable thing because it takes energy to produce and having
• 21:06
  Speaker 3: that be the arbiter of value. And so if you
• 21:09
  Speaker 3: look at the political process today, it's a process issue
• 21:13
  Speaker 3: more than anything else, and that oftentimes the least accountable
• 21:17
  Speaker 3: party ends up winning an office because of all the
• 21:19
  Speaker 3: promises they make and what happens then, well more units
• 21:23
  Speaker 3: get printed, right, and they just get printed and printed
• 21:26
  Speaker 3: over time, and that's what ultimately causes inflation. And it's
• 21:29
  Speaker 3: you know, it's not a red issue or blue issue.
• 21:32
  Speaker 3: Most of the time, Republicans are cutting taxes in a
• 21:35
  Speaker 3: way that probably doesn't make sense from a systemic perspective.
• 21:38
  Speaker 3: At the other side of the equation, oftentimes the blue
• 21:42
  Speaker 3: side of the aisle increases in titlements right without an offset,
• 21:47
  Speaker 3: and so both of those are bad things for the
• 21:50
  Speaker 3: for the overall medium through which we transact over time.
• 21:53
  Speaker 3: And so now you've got a system that offers a
• 21:56
  Speaker 3: promise of effectively cutting that whole. The clown show is
• 21:59
  Speaker 3: like sometimes out entirely, so you look like you're not
• 22:04
  Speaker 3: believing it.
• 22:05
  Speaker 2: Well, you know, I don't care about deficits. Since the
• 22:09
  Speaker 2: past fifty years, I've been hearing about the problem with
• 22:12
  Speaker 2: printing money, and everything that we were warned against didn't happen.
• 22:16
  Speaker 2: The dollar hasn't devalued, we haven't had hyperinflation, we haven't
• 22:20
  Speaker 2: crowded out private capital, and you could still lend money
• 22:24
  Speaker 2: to Uncle Sam at historically low rates if you want
• 22:29
  Speaker 2: three and a half four percent as a yield. So
• 22:31
  Speaker 2: all the warnings about printing money and deficits have been
• 22:35
  Speaker 2: you know, the boy who crolled cried wolf for half
• 22:38
  Speaker 2: a century. So there's that, and then there's okay, So
• 22:44
  Speaker 2: here's an idea that we can what do we limit
• 22:46
  Speaker 2: it to twenty four million twenty one million coins?
• 22:50
  Speaker 1: And that.
• 22:53
  Speaker 2: Scarcity creates value. I understand it's virtual. I understand the
• 23:01
  Speaker 2: advantages of having things be purely digital from conception forward.
• 23:08
  Speaker 2: I have a hard time getting past the criminality and
• 23:12
  Speaker 2: the pig butchering and the blackmail. That that's a little
• 23:16
  Speaker 2: problematic and it's sort of like democracy, all the other
• 23:20
  Speaker 2: you know, it's the worst system except all the others. Well,
• 23:23
  Speaker 2: a central bank and a government that make sure we're
• 23:28
  Speaker 2: doing something within reason is better than just opening it
• 23:34
  Speaker 2: up to the wild west, which is what this seems
• 23:37
  Speaker 2: to have been for a long time. The US did
• 23:41
  Speaker 2: was pretty aggressive in embracing it, especially this administration, and
• 23:46
  Speaker 2: it seems to have speculatively run up in anticipation from that.
• 23:51
  Speaker 2: And you know, once it was all in the price,
• 23:54
  Speaker 2: you know, we got cut in half. It's when you're
• 23:57
  Speaker 2: talking about stability. Yeah, the US dollar was down nine
• 24:01
  Speaker 2: percent in twenty twenty five, not cut in half. This
• 24:04
  Speaker 2: is a giant whack in you know, less than six months.
• 24:09
  Speaker 2: So I have a hard time just wrapping my head around, Oh,
• 24:12
  Speaker 2: the source of stability is something with no fundamental value
• 24:16
  Speaker 2: but swinging wildly up and down. So I'm I'm not
• 24:22
  Speaker 2: as negative about it as a lot of people are.
• 24:24
  Speaker 2: I was really negative about the NFTs and Mike, which, wait,
• 24:29
  Speaker 2: you want to take something with literally no value and
• 24:33
  Speaker 2: totally reproducible, and like I understood the idea of hey,
• 24:37
  Speaker 2: you're gonna buy a ten thousand dollars burken bag, and
• 24:40
  Speaker 2: here's a unique identifier on the blockchain. All right, that
• 24:43
  Speaker 2: made some sense, but not sixty eight million dollars. This
• 24:49
  Speaker 2: is sort of crazy prices he's traded at. So there
• 24:52
  Speaker 2: seems to be a lot of speculative excess that get
• 24:56
  Speaker 2: in the way of the technological story underneath.
• 25:01
  Speaker 3: Yeah, and you think you bring up a good point
• 25:03
  Speaker 3: with regard to the United States and the depths. It's
• 25:05
  Speaker 3: not making a big impact, and that's because we are
• 25:08
  Speaker 3: the best house in a bad neighborhood. From a fiat perspective,
• 25:11
  Speaker 3: I mean, we have the reason that America is the
• 25:14
  Speaker 3: most desire place to be. From an immigration perspective, I
• 25:17
  Speaker 3: think we have four time multiples the number of immigrants
• 25:21
  Speaker 3: as the next fore closest countries combined. Again, that comes
• 25:24
  Speaker 3: down to stability of process, rule of law, and property rights.
• 25:28
  Speaker 3: And so if there's now a form of currency that
• 25:31
  Speaker 3: wasn't possible fifty twenty years ago, call it that has
• 25:35
  Speaker 3: more stability a process and more certainty around property rights
• 25:38
  Speaker 3: over the long term. I think it's an education issue
• 25:42
  Speaker 3: as much as anything else interesting, and people may not
• 25:46
  Speaker 3: come around to that view, But from my perspective, the
• 25:49
  Speaker 3: quantitative inevitability of the technology is pretty compelling when you
• 25:53
  Speaker 3: look at just the Bitcoin versus gold. Right, Gold's done
• 25:56
  Speaker 3: amazing in the past year. I get it, it's a
• 25:58
  Speaker 3: deep part of the debasement, tit. Bitcoin hasn't. But when
• 26:02
  Speaker 3: you think about you know, if gold is the predominant
• 26:05
  Speaker 3: check and balance on Fiat, fiat's a lack of accountability.
• 26:10
  Speaker 3: And then you look at the functional attributes of bitcoin,
• 26:14
  Speaker 3: it's so far superior to gold.
• 26:16
  Speaker 2: So you join, like Mason in eight, pretty much right
• 26:19
  Speaker 2: in the middle of the financial crisis. How did that
• 26:22
  Speaker 2: experience shape your perspective on investing and in particular on value.
• 26:30
  Speaker 3: Wow's start with a hard hitting question here. So that
• 26:33
  Speaker 3: was a as you point out, I joined right at
• 26:35
  Speaker 3: the top. I think when I joined Capital Management there
• 26:39
  Speaker 3: were roughly one hundred and fifty people working there, and
• 26:42
  Speaker 3: then by the time you know, Capital Management merged with Clearbridge,
• 26:50
  Speaker 3: there were a substantially fewer number of people working there,
• 26:53
  Speaker 3: just because assets flew out the door, performance struggled, and
• 26:59
  Speaker 3: you know, it could be a pretty ugly compounding effect
• 27:02
  Speaker 3: on an asset manager.
• 27:02
  Speaker 2: So for sure, by the way, that story was pretty
• 27:06
  Speaker 2: much ubiquitous throughout finance.
• 27:09
  Speaker 3: Yeah, and so I think that taught me you know,
• 27:12
  Speaker 3: you to run one of these businesses, you obviously want
• 27:14
  Speaker 3: to have some extra gas in the tank. You know,
• 27:18
  Speaker 3: at all times you want to you don't want to
• 27:21
  Speaker 3: run it too thin from an operating capital perspective, if
• 27:25
  Speaker 3: you want to build it for the long term. And
• 27:29
  Speaker 3: so it's a good idea to keep those fixed costs
• 27:31
  Speaker 3: lower than you might even anticipate.
• 27:34
  Speaker 2: So let's talk about building on that. You come out
• 27:37
  Speaker 2: of the financial crisis, you get your CFA soon after
• 27:41
  Speaker 2: twenty eleven, something like that, that sounds right, and then
• 27:45
  Speaker 2: become a Chartered market technician in twenty eighteen. Unusual combination.
• 27:50
  Speaker 2: Tell us why you went that route.
• 27:53
  Speaker 3: Yeah, So the analogy I make is if the CFA
• 27:57
  Speaker 3: teaches you to play your cards on the poker table,
• 28:00
  Speaker 3: CMT teaches you to play the other players at the
• 28:02
  Speaker 3: poker table, and that one of the interesting things about
• 28:06
  Speaker 3: the CMT is number one, it takes a lot less
• 28:08
  Speaker 3: time than the CFA. But number two, I use that
• 28:12
  Speaker 3: in that some of the teachings from that more often
• 28:14
  Speaker 3: now than I use the CFA.
• 28:16
  Speaker 2: It's funny the way you described it. I always thought
• 28:19
  Speaker 2: the difference was financial analysts tell you what to buy.
• 28:24
  Speaker 2: Technicians tell you when to buy.
• 28:26
  Speaker 3: Well, I think that's accurate as well. Yeah, and so
• 28:29
  Speaker 3: one of the things that it's very easy to do
• 28:31
  Speaker 3: as a value investor to see multiples coming down and
• 28:33
  Speaker 3: a stock going down, you go, why this is way
• 28:35
  Speaker 3: too cheap, and reality is that it could just keep
• 28:38
  Speaker 3: going down because it's going down and people are selling it,
• 28:40
  Speaker 3: and you have to be able to read that on
• 28:42
  Speaker 3: the chart and when the volumes change and when the
• 28:45
  Speaker 3: investor behavior changes. So it teaches you to look at
• 28:48
  Speaker 3: investor behavior. It teaches you how to figure out what
• 28:51
  Speaker 3: other investors are thinking based upon price trends, in action,
• 28:55
  Speaker 3: and volume, and it's been a really valuable skill set
• 28:59
  Speaker 3: and compliment the CFA.
• 29:01
  Speaker 2: So walk us through your process from I DEA generation
• 29:05
  Speaker 2: to execution and position sizing. What sort of steps do
• 29:09
  Speaker 2: you have to work your way through?
• 29:11
  Speaker 3: Well, I think a lot of it starts with the
• 29:13
  Speaker 3: appreciation that most assets are efficiently priced. Right, so we
• 29:16
  Speaker 3: have a portfolio of things that we believe are undervalued,
• 29:20
  Speaker 3: and so all day, every day, we're constantly running through screens.
• 29:24
  Speaker 3: We're reading research, we're looking at price movements, we're looking
• 29:28
  Speaker 3: at insider action. A lot of the time, whether insiders
• 29:31
  Speaker 3: are buying or selling to potentially point something out to us,
• 29:37
  Speaker 3: But then we have to then once we identify something
• 29:39
  Speaker 3: that looks interesting, it has to then be better than
• 29:42
  Speaker 3: what else we have in the portfolio. So we have
• 29:46
  Speaker 3: a group of things that we own and like, but
• 29:48
  Speaker 3: at the same time, we're constantly comparing new ideas to
• 29:51
  Speaker 3: see if it can be a fit coming to the portfolio.
• 29:54
  Speaker 3: And so how we make changes is going to be
• 29:57
  Speaker 3: obviously directly relevant to that thesis. In some cases, we'll
• 30:01
  Speaker 3: have a name that the investment these has completely changed
• 30:04
  Speaker 3: with the latest earnings report or something went out the window,
• 30:07
  Speaker 3: and then we'll have an ability to either add something
• 30:09
  Speaker 3: new or bump something up. But it's always about constantly
• 30:13
  Speaker 3: looking for new ideas that could be undervalued and then
• 30:15
  Speaker 3: trying to figure out the right way to wait them.
• 30:17
  Speaker 3: Because there's unconstrained investors. All of our torque isn't a
• 30:20
  Speaker 3: position sizing in the weights. So you know, we made
• 30:25
  Speaker 3: a lot of mistakes, and oftentimes the answer to those
• 30:28
  Speaker 3: mistakes is sitting right in our portfolio. You know, it
• 30:30
  Speaker 3: almost always is we should done more of that and
• 30:32
  Speaker 3: less of that, And so I spent a lot of
• 30:34
  Speaker 3: time just going through the portfolio and figuring out where
• 30:37
  Speaker 3: the relative weights should be. But I would say at
• 30:39
  Speaker 3: a high level, probabilistic fundamental value.
• 30:44
  Speaker 2: Probabilistic fundamental value, all right, I like that phrase. When
• 30:48
  Speaker 2: you're looking at fundamental values, how do you distinguish between
• 30:52
  Speaker 2: something that's only temporarily out of favor, temporarily hated to Oh,
• 30:58
  Speaker 2: this business model is structurally broken. How do you avoid
• 31:01
  Speaker 2: the classic value traps?
• 31:03
  Speaker 3: Well, we don't always unfortunately, you know, and just because
• 31:09
  Speaker 3: something is undervalue doesn't mean that other people are going
• 31:12
  Speaker 3: to agree that it's undervalue. So I think that's an
• 31:14
  Speaker 3: important thing to keep in mind too. And it's important
• 31:17
  Speaker 3: to use the markets to help you figure out how
• 31:20
  Speaker 3: to change your position sizes. Sometimes you start legging into
• 31:23
  Speaker 3: something and it just keeps going down. You should probably
• 31:27
  Speaker 3: heed the markets feedback a lot of the time relative
• 31:30
  Speaker 3: to your own positions in their sizes. So one of
• 31:33
  Speaker 3: the key reports that my dad looked at every day
• 31:36
  Speaker 3: I still look at every day is our daily Performance report,
• 31:39
  Speaker 3: And basically it just has the entire portfolio ranked by weight,
• 31:43
  Speaker 3: and then how it's done over the past day, how
• 31:46
  Speaker 3: each name has done over the past day, week, month, quarter,
• 31:51
  Speaker 3: six months a year.
• 31:52
  Speaker 2: What about the reverse? When something's working out, do you
• 31:55
  Speaker 2: pyramid and add to the position as it runs?
• 31:58
  Speaker 3: It depends? So I mean we just you know, I
• 32:00
  Speaker 3: know you don't like to talk about short term stuff
• 32:02
  Speaker 3: and market related things, but we just eliminated our Google
• 32:04
  Speaker 3: position a few days ago, right, So.
• 32:06
  Speaker 2: We mean that had a great twenty twenty five.
• 32:09
  Speaker 3: It did, and we actually got the I think the
• 32:11
  Speaker 3: investment thesis right. Hopefully we got the exit right, but
• 32:15
  Speaker 3: you know, the thesis there was, Okay, here's Google, this
• 32:18
  Speaker 3: is this should be a huge AI winner. Everyone was
• 32:22
  Speaker 3: concerned about their search business at the time and AI
• 32:24
  Speaker 3: replacing search. And you know our position was hold on
• 32:27
  Speaker 3: This trades at a massive discount to the mag seven.
• 32:29
  Speaker 3: It trades at a discount to the market on an
• 32:31
  Speaker 3: earnings and cash flow basis. Yet it has all the
• 32:34
  Speaker 3: distribution mechanisms for AI. You know, they're in seven out
• 32:36
  Speaker 3: of ten phones globally.
• 32:39
  Speaker 2: And all the technology capability to implement AI. I mean,
• 32:44
  Speaker 2: they're a giant tech brain trust.
• 32:46
  Speaker 3: Right exactly. And they had a ton of funding to
• 32:48
  Speaker 3: build it with, so and you know Waymo and all
• 32:51
  Speaker 3: these other you know, YouTube, all these other insane businesses
• 32:54
  Speaker 3: and was trading at a discount to the market. It
• 32:56
  Speaker 3: just didn't make any sense, so we bought that. That's
• 32:58
  Speaker 3: probably fairly valued today, I think, you know, and obviously
• 33:01
  Speaker 3: one of the classic mistakes is selling things too early.
• 33:05
  Speaker 3: Could it continue to compound? Yes, But if you look
• 33:08
  Speaker 3: at why the whole mag seven hyper scalers have done
• 33:11
  Speaker 3: so well over the past two to three years, the
• 33:13
  Speaker 3: answer has been, well, they're number one, growing faster than
• 33:16
  Speaker 3: everything else, and number two, they've got these huge incremental
• 33:19
  Speaker 3: free cash flow margins. But what's been going on recently
• 33:23
  Speaker 3: they don't really have big incremental free cash flow margins
• 33:25
  Speaker 3: anymore because they're dumping so much money into the AI
• 33:29
  Speaker 3: space that there really is no free cash flow and
• 33:32
  Speaker 3: now you're betting on it materializing down the line. So
• 33:35
  Speaker 3: where we take the other side on the AI situation
• 33:37
  Speaker 3: is if you actually look at the dollars required to
• 33:41
  Speaker 3: be found in revenues five years out, they're so substantial.
• 33:46
  Speaker 3: The number one, they're bigger than the entire software as
• 33:48
  Speaker 3: a service business right now globally around the world. Okay,
• 33:52
  Speaker 3: and number one number two, the total revenues that are
• 33:55
  Speaker 3: required to justify all the investment that's gone in is
• 33:58
  Speaker 3: bigger than the combined of mag seven today. And those
• 34:01
  Speaker 3: companies have been scaling for thirty to forty fifty years
• 34:04
  Speaker 3: in some cases, and so you've got to find that
• 34:06
  Speaker 3: in five years to make all this investment worth it.
• 34:09
  Speaker 3: And if you think about the structural the way it works,
• 34:12
  Speaker 3: it's all this capex investment upfront and then it's very
• 34:15
  Speaker 3: little marginal costs. Right, So you potentially have a race
• 34:17
  Speaker 3: to the bottom on pricing on the top line in
• 34:20
  Speaker 3: a few years as well. So that gives us a
• 34:22
  Speaker 3: little bit of pause whether or not it's right, Who knows, huh.
• 34:25
  Speaker 2: So what I'm hearing is that there's a probabilistic quantitative discipline.
• 34:31
  Speaker 2: You're looking at value, you're looking at growth rate, you're
• 34:34
  Speaker 2: looking at risk, combined with a qualitative judgment about management
• 34:39
  Speaker 2: and sounds like specific industry and whether these moonshots are
• 34:44
  Speaker 2: going to pay off or not. How do you balance
• 34:46
  Speaker 2: between the squishy qualitative side and the more quantitative mathematical side.
• 34:54
  Speaker 3: Well, I think there always has to be a quantitative
• 34:55
  Speaker 3: value perspective, and anything we're buying and thinking about often
• 35:00
  Speaker 3: from a total addressable market perspectives versus the current valuation.
• 35:07
  Speaker 3: One of the big themes for us also is alignment.
• 35:10
  Speaker 3: So we want to see managers, you know, actually using
• 35:14
  Speaker 3: their capit So it's capital allocation and alignment. So are
• 35:17
  Speaker 3: they using their capital in ways that align with our
• 35:19
  Speaker 3: view of the stock? You know, are they buying back
• 35:22
  Speaker 3: a lot of shares if it's mispriced hopefully yes? Are
• 35:26
  Speaker 3: they aligned with you as a manager of the company,
• 35:29
  Speaker 3: you know, principal agent conflict is one of the biggest
• 35:31
  Speaker 3: sources of value destruction you can possibly imagine, and so
• 35:34
  Speaker 3: that's important to us as managers. We are the biggest
• 35:38
  Speaker 3: investors in our own funds as well, so it really.
• 35:39
  Speaker 2: Is very interesting.
• 35:41
  Speaker 3: Yeah, but it's you know, it's a first principles based approach.
• 35:45
  Speaker 3: So one of the things we pay special attention to,
• 35:49
  Speaker 3: I think more so than most and can be opportunistic
• 35:51
  Speaker 3: about moving on, is insider activity. So when you see
• 35:53
  Speaker 3: a big insider buy, if you can then reverse engineer
• 35:56
  Speaker 3: a quantitative value perspective into that insider buy, that makes
• 36:01
  Speaker 3: a lot of sense. That can be a really compelling.
• 36:04
  Speaker 2: I just saw a big Wall Street Journal piece on
• 36:08
  Speaker 2: to insider buyers indicate future performance, and I saved it.
• 36:13
  Speaker 2: I haven't read it yet, what's your take. I mean,
• 36:16
  Speaker 2: the assumption is insiders, there's a million reasons to sell
• 36:20
  Speaker 2: a stock if you need liquidity, there's only one reason
• 36:22
  Speaker 2: to buy a stock. You stay with that conclusion. Insider
• 36:28
  Speaker 2: buying is indicative of positive things to come.
• 36:32
  Speaker 3: I think it's a potentially high signal source of information.
• 36:35
  Speaker 3: So in the aggregate doesn't necessarily guarantee it. No, But
• 36:40
  Speaker 3: if you can contextualize and say, Okay, this CEO is
• 36:44
  Speaker 3: really smart, He's done this sort of thing in the past.
• 36:47
  Speaker 3: He has a plan for this company, here's what it's
• 36:49
  Speaker 3: looking like, and you just put a huge amount of
• 36:51
  Speaker 3: personal capital in, that can be a really good sis.
• 36:55
  Speaker 2: So it's not binary. There are other factors that have
• 36:58
  Speaker 2: to be It's a little more nuanced than the way
• 37:00
  Speaker 2: we typically think of it.
• 37:01
  Speaker 3: Context matters always really interesting.
• 37:04
  Speaker 2: Coming up, we continue our conversation with Bill Miller, the
• 37:07
  Speaker 2: fourth chief investment officer at Miller Value Fund, talking about
• 37:12
  Speaker 2: today's market environment. I'm Barry Ridlts. You're listening to Masters
• 37:16
  Speaker 2: your Business on Bloomberg Radio. I'm Barry rid Halts. You're
• 37:33
  Speaker 2: listening to Masters in Business on Bloomberg Radio or watching
• 37:37
  Speaker 2: us on YouTube television I'm speaking with Bill Miller the fourth.
• 37:41
  Speaker 2: He's Miller Value Fund's chief investment officer and portfolio manager.
• 37:47
  Speaker 2: He works with his father, Bill Miller the third, the
• 37:50
  Speaker 2: famous value investor. So let's talk about what's going on
• 37:55
  Speaker 2: in the current environment. If you look at today's markets,
• 37:58
  Speaker 2: where do you see things that are very much mispriced,
• 38:02
  Speaker 2: either by asset class, sector, geography, factor, whatever. What's out
• 38:08
  Speaker 2: there that's not fully priced, or what's out there that's overpriced.
• 38:14
  Speaker 3: Yeah, I think aspects of the current environment remind us
• 38:17
  Speaker 3: of nineteen ninety nine. Right. So You've had a narrative
• 38:21
  Speaker 3: driven performance led by AI. You have a very narrow
• 38:26
  Speaker 3: market for the most part, with mag seven leading huge
• 38:29
  Speaker 3: returns to momentum momentum factor last year. But then if
• 38:34
  Speaker 3: you look at the actual macroeconomic backdrop, you're seeing deregulation,
• 38:39
  Speaker 3: you are seeing weaker dollar, and you're seeing economic acceleration
• 38:46
  Speaker 3: potentially in the US. And so when you think about
• 38:50
  Speaker 3: all those things combined and you look at what happened
• 38:53
  Speaker 3: between call it nineteen ninety nine, two thousand, all the
• 38:56
  Speaker 3: way until six oh seven, you had the market go
• 39:00
  Speaker 3: effectively nowhere for seven years. I mean, it went down
• 39:02
  Speaker 3: and bounced around, right, because I think valuation heading into
• 39:05
  Speaker 3: that period was very high. But what did really well
• 39:08
  Speaker 3: during that period actually small MidCap value. And if you
• 39:12
  Speaker 3: look at the relative valuation discrepancies today between smid value
• 39:17
  Speaker 3: and large growth, they're right at the same sort of
• 39:21
  Speaker 3: extremes that occurred in nineteen ninety nine. And so you
• 39:24
  Speaker 3: have same valuation extremes, you have compelling valuations and a
• 39:29
  Speaker 3: lot of the small MidCap value space, and you have
• 39:33
  Speaker 3: an economic acceleration backdrop. So that means that a lot
• 39:38
  Speaker 3: of more cyclically oriented things, value oriented names that are
• 39:44
  Speaker 3: care more about what's going on in the economy. There's
• 39:47
  Speaker 3: a much lower hurdle rate for those guys to exceed
• 39:50
  Speaker 3: the expectations embedded in the valuations right over the next
• 39:53
  Speaker 3: five to seven years than there are in the massive
• 39:55
  Speaker 3: AI space.
• 39:57
  Speaker 2: So let's talk a little bit about small and MidCap value.
• 40:00
  Speaker 2: Last year we only saw two that's twenty twenty five.
• 40:04
  Speaker 2: We only saw two of the seven mag seven outperform
• 40:08
  Speaker 2: the S and P five hundred, which tends to suggest, hey,
• 40:12
  Speaker 2: maybe this is broadening out. We're going to see more
• 40:14
  Speaker 2: mid caps and more small caps. The value skeptics are
• 40:19
  Speaker 2: going to say Hey, we've had so many false starts
• 40:21
  Speaker 2: in value. It's been fifteen years of growth winning. How
• 40:25
  Speaker 2: do you respond to that?
• 40:27
  Speaker 3: Yeah, I think that those snapbacks can be violent. Right.
• 40:30
  Speaker 3: We actually had one of our research providers recently called
• 40:33
  Speaker 3: MidCap value quote unquote inferior asset class. I mean that
• 40:36
  Speaker 3: sounds like capitulation to me. There's a lot of underloved
• 40:41
  Speaker 3: stuff out there that's really interesting. So energy sectors. Energy
• 40:45
  Speaker 3: is interesting right now. You know, if you look at
• 40:47
  Speaker 3: its weight in the market, it's three or four percent,
• 40:49
  Speaker 3: But if you look at its free cash flow contribution
• 40:52
  Speaker 3: over the next year to the market, it's going to
• 40:54
  Speaker 3: be ten to twelve percent most likely.
• 40:55
  Speaker 2: What's that historic relationship look like.
• 40:58
  Speaker 3: I don't know if it's that large, to be honest,
• 41:00
  Speaker 3: that gap, and so, you know, energy is under love.
• 41:04
  Speaker 3: It's underperformed for so long. It's not the best industry
• 41:08
  Speaker 3: from a capital allocation alignment perspective, but it's gotten a
• 41:11
  Speaker 3: lot better over the past few years. And I think
• 41:14
  Speaker 3: you can see those types of stocks do really well.
• 41:17
  Speaker 3: You know, sadly, I do think it's a really cheap
• 41:18
  Speaker 3: coll option on global strife. Right now, Energy prices, you know,
• 41:22
  Speaker 3: they're pretty bouncing pretty close to the marginal cost of production, which.
• 41:26
  Speaker 2: Is shocking when you think about Russia and Ukraine and
• 41:30
  Speaker 2: Gaza and Israel and what's going on in Venezuela and
• 41:34
  Speaker 2: who knows what's going to happen. By the time this
• 41:37
  Speaker 2: comes out, we can own Greenland. So given given all
• 41:41
  Speaker 2: of that, what does it What does it mean to
• 41:45
  Speaker 2: see despite all this geopolitical turmoil, energy prices are almost reasonable.
• 41:52
  Speaker 3: Yeah they are. They've started to turn up, and energy
• 41:55
  Speaker 3: has done well over the past few weeks. It could
• 41:57
  Speaker 3: continue to do really well. So that's why we're overweight energy.
• 42:01
  Speaker 2: What other sectors do you like?
• 42:04
  Speaker 3: You know, financials, we're still overweight. I think you're going
• 42:07
  Speaker 3: to continue to see curve steeping and that should be
• 42:10
  Speaker 3: a decent earnings growth in those. I think utilities are
• 42:14
  Speaker 3: finally attractively valued again at you know, ten to thirteen
• 42:18
  Speaker 3: times earnings in a lot of cases with very clear
• 42:21
  Speaker 3: growth pathways, and I'd say little risk. You know, we
• 42:24
  Speaker 3: don't have enough energy in the country, and utilities are
• 42:27
  Speaker 3: pretty attractive.
• 42:27
  Speaker 2: Here, especially as AI and data centers continue to come online.
• 42:33
  Speaker 2: You take very concentrated position, at least compared to traditional
• 42:39
  Speaker 2: value managers. How do you what's the framework for thinking
• 42:41
  Speaker 2: about this? How do you position size these? Is this
• 42:45
  Speaker 2: just strictly a function of Hey, we're not closet indexers.
• 42:49
  Speaker 2: We have a high active share, and when we have
• 42:52
  Speaker 2: high conviction, we really we go all in to follow
• 42:56
  Speaker 2: the poker analogy.
• 42:58
  Speaker 3: Yeah, that's a good way of putting it. I mean,
• 43:00
  Speaker 3: if you consider that most stocks underperformed the index for
• 43:05
  Speaker 3: their lifetime in it, it's an interesting exercise to come
• 43:11
  Speaker 3: at it from the entire other side and just say, okay,
• 43:13
  Speaker 3: what are the ten to fifteen names that you think
• 43:16
  Speaker 3: have the highest probability of actually outperforming instead of effectively.
• 43:21
  Speaker 3: What most active managers do is they have these risk
• 43:23
  Speaker 3: constraints and they can only overweight certain sectors a little
• 43:26
  Speaker 3: bit or so. You know, the closer you are to
• 43:31
  Speaker 3: the benchmark, the more likely you are to underperforming, right,
• 43:34
  Speaker 3: because you're just layering higher fees on something that looks
• 43:36
  Speaker 3: more like the benchmark. So, you know, we're very comfortable
• 43:40
  Speaker 3: taking bets entirely outside of the index, with the obvious
• 43:46
  Speaker 3: caveat that there are going to be period when we're
• 43:47
  Speaker 3: going to underperform meaningfully just because we're taking entirely different
• 43:51
  Speaker 3: risks and there'll be some periods to reoutperform by a lot.
• 43:53
  Speaker 3: So I think that's really the only way to.
• 43:55
  Speaker 2: Do it is to not be a closet in essentially.
• 44:01
  Speaker 3: Yeah, and you have to match the investment process to
• 44:03
  Speaker 3: your IP. So you know, for us, thinking that the
• 44:08
  Speaker 3: edge is on the thirty seventh page of the Excel
• 44:10
  Speaker 3: spreadsheets just not realistic, right. Or if your fidelity and
• 44:13
  Speaker 3: you've got a guy that's been following a certain industry
• 44:15
  Speaker 3: for a long period of time and really understands the
• 44:17
  Speaker 3: nuances of every single company and what could change, you know,
• 44:21
  Speaker 3: that might make sense. But it just depends on what
• 44:23
  Speaker 3: you're trying to do, and you have to match up
• 44:24
  Speaker 3: those two things.
• 44:25
  Speaker 2: So we've been kind of dancing around AI throughout this conversation,
• 44:30
  Speaker 2: So let's let's talk about that a little bit. Are
• 44:33
  Speaker 2: you thinking of AI as its own investment entity? Are
• 44:38
  Speaker 2: you thinking of it as disrupting traditional business models? Are
• 44:42
  Speaker 2: you thinking of other businesses forget the Max seven, the
• 44:46
  Speaker 2: mag four ninety three as being the beneficiaries of AI
• 44:50
  Speaker 2: to be more productive, efficient, profitable? How are you thinking
• 44:54
  Speaker 2: about AI as an investor?
• 44:56
  Speaker 3: I think it's all of those things. Yeah, it's it's
• 45:01
  Speaker 3: all those things. So I use it all day every day.
• 45:03
  Speaker 2: Man, how do you that was really my next question,
• 45:06
  Speaker 2: how do you use AI throughout the day for your process,
• 45:10
  Speaker 2: both for selecting investments and just managing a large investment.
• 45:15
  Speaker 3: From Well, it's an enormous time saver, and it's not
• 45:19
  Speaker 3: necessarily always a time saver on the investment front, although
• 45:22
  Speaker 3: it often is. It can just be a timesaver personally,
• 45:25
  Speaker 3: Like if you have an interpersonal issue that is weighing
• 45:28
  Speaker 3: on you, sometimes you throw it into AI and you
• 45:30
  Speaker 3: get a better answer than you could have gotten from
• 45:31
  Speaker 3: asking your three closest friends and move on. So if
• 45:35
  Speaker 3: you're thinking in units of time, it's a huge time
• 45:37
  Speaker 3: saver for me personally. I think a lot of life
• 45:39
  Speaker 3: is about asking the right questions, and you got a
• 45:41
  Speaker 3: pretty good set of answers there, or method for answering
• 45:45
  Speaker 3: questions you point out earlier. It can be wrong often
• 45:48
  Speaker 3: and you have to consider that, but it's got a
• 45:50
  Speaker 3: lot of good perspectives in there that can bring to
• 45:52
  Speaker 3: bear on a lot of different things.
• 45:53
  Speaker 2: So what tools do you use? What's your favorite AI?
• 45:57
  Speaker 3: At the moment? We have Chat, GPT and Gemini going
• 46:01
  Speaker 3: for business, both for business, and then we're also adding
• 46:04
  Speaker 3: Claude here soon.
• 46:06
  Speaker 2: I just I just put Claude on a couple of
• 46:08
  Speaker 2: desktops and a laptop, and the coding side of it
• 46:13
  Speaker 2: is really fascinating, And I can see why people are
• 46:19
  Speaker 2: concerned that this could replace certain at least menial kind
• 46:26
  Speaker 2: of work, grinding work, Like, oh, it does this so
• 46:28
  Speaker 2: much faster and better than I could ever grind down
• 46:31
  Speaker 2: on my own. Yeah, Claud's kind especially Claude pro. It's
• 46:35
  Speaker 2: really kind of impressive. And the question is, is two
• 46:38
  Speaker 2: hundred a month a lot? Is that not a lot?
• 46:41
  Speaker 2: Is that a fair price? I think it sounds like
• 46:44
  Speaker 2: a lot of money compared to what is perplexity twenty
• 46:47
  Speaker 2: bucks a month. That seems like free practically for that
• 46:51
  Speaker 2: much power. So you're using it everywhere? Yeah, what are
• 46:55
  Speaker 2: you hearing from your peers? Is this the sort of
• 46:57
  Speaker 2: thing that everybody has gone all in on? Is the fear? Hey,
• 47:01
  Speaker 2: if we don't do this, our competitors are, so we
• 47:03
  Speaker 2: better step up.
• 47:06
  Speaker 3: I don't know if it's fear just as much as
• 47:08
  Speaker 3: the ability to cover so much more ground in the
• 47:11
  Speaker 3: same amount of time or less. You know, it's just
• 47:15
  Speaker 3: a super powerful technology. And we use it a lot.
• 47:18
  Speaker 2: Huh, really really interesting. So I want to get to
• 47:24
  Speaker 2: this question, and I forgot about it. So we're talking
• 47:27
  Speaker 2: about the current environment. AI is obviously a game changer,
• 47:31
  Speaker 2: but we've gone through a few decades of major regime changes.
• 47:36
  Speaker 2: We had the era of monetary policy, and then starting
• 47:39
  Speaker 2: in twenty twenty, we've had the era of fiscal policy.
• 47:44
  Speaker 2: When you're looking at central banks and the government higher
• 47:48
  Speaker 2: for longer, zero interest rates, all these different things. How
• 47:53
  Speaker 2: do these geopolitical variables affect how you think about putting
• 47:59
  Speaker 2: capital work, how you think about risk?
• 48:03
  Speaker 3: Well, I think one really big picture change sort of
• 48:07
  Speaker 3: going back over the past decade to today is coming
• 48:11
  Speaker 3: out of the financial crisis, capital effectively had no cost.
• 48:16
  Speaker 3: I mean, you saw the insane amount of money printing
• 48:18
  Speaker 3: that occurred, but that's because that was to offset a
• 48:21
  Speaker 3: huge hole in capex that had gone into housing that
• 48:24
  Speaker 3: wasn't necessarily needed, right, And we had to work that
• 48:27
  Speaker 3: out from a demand supply demand perspective. And we've now
• 48:30
  Speaker 3: done that. But if you go back and read what
• 48:32
  Speaker 3: the FED said, there was a study that came out
• 48:35
  Speaker 3: of I think the San Francisco FED where they used
• 48:39
  Speaker 3: computers to look at the language that was used in
• 48:42
  Speaker 3: meetings right about how to set rates, and what they
• 48:45
  Speaker 3: found was that the two percent inflation number, that's kind
• 48:51
  Speaker 3: of the bogie. It was supposed to be quote unquote
• 48:53
  Speaker 3: symmetrical goal. It wasn't symmetrical at all the way they
• 48:56
  Speaker 3: were setting rates for the between twenty ten roughly and
• 48:58
  Speaker 3: call it twenty twenty or so. And so that has
• 49:01
  Speaker 3: an enormous implication I think for the way all kinds
• 49:03
  Speaker 3: of different assets perform. And I think that's why massive
• 49:06
  Speaker 3: growth had the run it did over the past decade, right,
• 49:09
  Speaker 3: because when capital has no cost, you're willing to look
• 49:11
  Speaker 3: out a huge distance.
• 49:12
  Speaker 2: To brace more risk because what are you going to
• 49:15
  Speaker 2: get one and a half two percent? It doesn't make
• 49:17
  Speaker 2: sense otherwise exactly.
• 49:18
  Speaker 3: And so that's why huge growth had the run it
• 49:20
  Speaker 3: did because capital had no opportunity cost. And now if
• 49:24
  Speaker 3: you look at where we are with mortgages at six
• 49:25
  Speaker 3: percent and capital actually has a cost, again, it has
• 49:30
  Speaker 3: major implications for the kinds of assets that are likely
• 49:33
  Speaker 3: to do well in the future. And it comes back
• 49:34
  Speaker 3: to the whole theme we talked about earlier around smid
• 49:37
  Speaker 3: value more capital intensive things potentially having a better decade
• 49:41
  Speaker 3: now that capital has a cost again.
• 49:43
  Speaker 2: Let me share a favorite factoid with you. Former FED
• 49:48
  Speaker 2: Vice chair Roger Ferguson wrote a white paper on the
• 49:53
  Speaker 2: origination of the two percent target, and he traced it
• 49:58
  Speaker 2: back to some random time television interview in the nineteen
• 50:02
  Speaker 2: eighties in New Zealand where someone threw out two percent
• 50:07
  Speaker 2: and that was it. It just magically stuck and you
• 50:10
  Speaker 2: can find that. You can find that paper online. It's
• 50:12
  Speaker 2: pretty hilarious. It's just such a random number that doesn't like,
• 50:18
  Speaker 2: it's not there's no underlying thesis for why it's two
• 50:23
  Speaker 2: when not three or one. It's just it just seems like, yeah,
• 50:27
  Speaker 2: that sounds about right.
• 50:28
  Speaker 3: Well, I think it's got to actually be higher than
• 50:30
  Speaker 3: that if you think about it, because generally in an.
• 50:32
  Speaker 2: Era of fiscal rather than monetary stimulus, right, you're going
• 50:35
  Speaker 2: to just inherently have higher prices.
• 50:38
  Speaker 3: Right. Well, I mean if you think about the fact
• 50:40
  Speaker 3: that most consumers overwhelming saving vehicle is their home. Okay,
• 50:47
  Speaker 3: what's the blended rate on mortgages right now out there?
• 50:50
  Speaker 3: That's just in the stuff.
• 50:52
  Speaker 2: Yeah, Well, half the individually owned homes there are no mortgages,
• 50:57
  Speaker 2: and the remaining half. It's a crazy set of numbers
• 51:00
  Speaker 2: of two and a half, three, three and a half four.
• 51:02
  Speaker 2: Just everybody was smart locked in a fixed rate before
• 51:05
  Speaker 2: the pandemic.
• 51:07
  Speaker 3: Well, so if house prices in the aggregate don't appreciate
• 51:10
  Speaker 3: by more than that interest rate, right, people are going
• 51:14
  Speaker 3: broke in their primary savings vehicle. So housing actually does
• 51:17
  Speaker 3: need to increase in value over a long period of
• 51:19
  Speaker 3: time where people slowly go broke.
• 51:22
  Speaker 2: It makes a lot of sense.
• 51:23
  Speaker 3: Yeah, so I think the two percent is I know
• 51:25
  Speaker 3: it is thrown out there, but I think it actually
• 51:27
  Speaker 3: has to be higher over the long term to kind
• 51:28
  Speaker 3: of make the math work for most people.
• 51:31
  Speaker 2: I couldn't agree more. All Right, I only have you
• 51:33
  Speaker 2: for a limited amount of time. Let's jump to our
• 51:35
  Speaker 2: favorite questions, some of which I know the answers to.
• 51:41
  Speaker 2: Starting with who were your mentors who helped shape your career?
• 51:46
  Speaker 3: Wow? So mister Keeney was my dad's original business partner,
• 51:52
  Speaker 3: and he's a fascinating human worked until the day he
• 51:55
  Speaker 3: died ninety two. Wow, an incredibly nice human being. I
• 52:00
  Speaker 3: don't think I ever said a bad word about anyone.
• 52:02
  Speaker 3: One of the things that was so interesting to me
• 52:04
  Speaker 3: about mister keene is he didn't start his career at
• 52:07
  Speaker 3: leg Mason in research until he was fifty. Wow. So
• 52:11
  Speaker 3: you know a lot of people, young people think, oh, here,
• 52:13
  Speaker 3: I am unlocked in this career. Now there's always time
• 52:15
  Speaker 3: to switch. And then he hopped over at fifty to
• 52:18
  Speaker 3: start this role where he had a prolific career and
• 52:22
  Speaker 3: influenced a lot of people and did that for forty
• 52:25
  Speaker 3: something years.
• 52:26
  Speaker 1: Wow.
• 52:26
  Speaker 3: So he was a very smart guy, generous to a fault.
• 52:31
  Speaker 3: One of my favorite stories about him and him and
• 52:33
  Speaker 3: my dad were heading out for lunch one day downtown Baltimore,
• 52:36
  Speaker 3: and you know, some homeless person comes up and says,
• 52:40
  Speaker 3: starts with the story, you know, I haven't eaten in
• 52:42
  Speaker 3: this many days and blah blah blah, and mister Keeney's
• 52:45
  Speaker 3: sits there listening to it. He gets out of his
• 52:47
  Speaker 3: wallet and he gives her, you know, it was like
• 52:49
  Speaker 3: a fifty dollars bill, certainly inflation to justin. He says, oh, man, here,
• 52:52
  Speaker 3: just just go get yourself some hot soup. Take care
• 52:56
  Speaker 3: of yourself. And she looks to it, she looks back
• 52:58
  Speaker 3: at him, she looks at it. She goes to hell
• 53:00
  Speaker 3: a soup I'm gonna get me some whiskey. But yeah,
• 53:05
  Speaker 3: so he was incredibly generous human being, contributed a lot
• 53:08
  Speaker 3: to animal welfare stuff. I'm a big believer in welfare causes,
• 53:14
  Speaker 3: so he was an influence on me. I can also
• 53:17
  Speaker 3: think of a handful of times just from business school
• 53:20
  Speaker 3: that not necessarily an individual mentor, but just one liners
• 53:24
  Speaker 3: from business school that I remember over the years. So
• 53:27
  Speaker 3: that line I gave you earlier about Ken French and
• 53:29
  Speaker 3: how long it takes for a manager to prove whether
• 53:31
  Speaker 3: or not his work is statistically valuable or not. The
• 53:35
  Speaker 3: other one liner he told us is never pay a
• 53:38
  Speaker 3: load for a mutual fund. He said, if there's one
• 53:39
  Speaker 3: thing you take away from my classes, never pay a
• 53:41
  Speaker 3: load on an investment fund. And that's certainly still true today.
• 53:44
  Speaker 2: Yeah. Absolutely. Let's talk about books. What are some of
• 53:47
  Speaker 2: your favorites. What are you reading right now?
• 53:49
  Speaker 3: Yeah, right now I'm reading a book called The Mattering Instinct,
• 53:54
  Speaker 3: but I think it's Rebecca Goldstein. But it's a fascinating
• 53:57
  Speaker 3: book on mattering, the mattering instinct, and it's about people's
• 54:02
  Speaker 3: desire to matter and what that means. So there's a
• 54:05
  Speaker 3: lot of psychology unit there's a lot of philosophy in it.
• 54:08
  Speaker 3: The basic premise is that we're all just trying to
• 54:11
  Speaker 3: overcome entropy, so the tendency for disorder and systems to increase,
• 54:16
  Speaker 3: and we're all going to die eventually.
• 54:17
  Speaker 2: I was going to say it's a losing battle, but well,
• 54:20
  Speaker 2: we're here exactly.
• 54:21
  Speaker 3: Let's do something interesting, right, So that's what I'm reading now.
• 54:25
  Speaker 3: I just read prior to this, Let Them the mil
• 54:29
  Speaker 3: Robins book, so it's one of the I think it's
• 54:31
  Speaker 3: the best selling book last year, right, So I can
• 54:35
  Speaker 3: sum that one up pretty succinctly. And it's focus on
• 54:39
  Speaker 3: what you can control and don't let anything else get
• 54:41
  Speaker 3: to you.
• 54:42
  Speaker 2: Sounds like good advice.
• 54:43
  Speaker 3: It's good advice. And I mentioned that to my dad
• 54:45
  Speaker 3: because he sees me reading it, and he's like, haven't
• 54:48
  Speaker 3: you ever read Marcus Aurelius's Meditations? Is this is not
• 54:51
  Speaker 3: a new.
• 54:51
  Speaker 2: Ideaoicism created the idea of controlling what's within your control
• 54:55
  Speaker 2: three thousand and two thousand years.
• 54:57
  Speaker 3: Ago exactly, And I have read that, and that's a
• 54:59
  Speaker 3: phenomenal book as well. It's just good to have more
• 55:01
  Speaker 3: modern stories that you can relate to.
• 55:04
  Speaker 2: What's keeping you entertaining These days. What are you streaming,
• 55:07
  Speaker 2: either podcasts or or you know, Netflix or whatever.
• 55:11
  Speaker 3: That's one of my things. I don't really do.
• 55:15
  Speaker 2: Netflix. No.
• 55:16
  Speaker 3: I'll watch competitive events, I'll watch sports, I'll watch, you know,
• 55:19
  Speaker 3: an occasional stand up comedy show, but I don't watch
• 55:21
  Speaker 3: the series.
• 55:22
  Speaker 2: Did you see the Australian Open this year?
• 55:24
  Speaker 3: I did. I watched some of that. It was pretty awesome.
• 55:26
  Speaker 2: I have the finals d v R and I haven't.
• 55:28
  Speaker 2: I haven't watched it yet, but I know you're a
• 55:31
  Speaker 2: tennis guy.
• 55:32
  Speaker 3: Yep.
• 55:33
  Speaker 2: It's rare to find someone who can take Djokovic and
• 55:37
  Speaker 2: put them back on his heels.
• 55:39
  Speaker 3: Yeah. Well the Djokovic centermat which match was pretty awesome.
• 55:42
  Speaker 1: Yeah.
• 55:42
  Speaker 2: Yeah, I say these. I watched them like months later
• 55:46
  Speaker 2: when I get around to it.
• 55:47
  Speaker 3: Yeah. I do golf, so that's something I've just started taking.
• 55:51
  Speaker 3: I'm terrible, you know. I'm an eighteen handicap high variants
• 55:54
  Speaker 3: eighteen though, so I can have some pretty good days.
• 55:57
  Speaker 3: But it's interesting because there's a similarity to investing in golf,
• 56:00
  Speaker 3: which is golf. So you get better at golf by
• 56:03
  Speaker 3: narrowing your misses.
• 56:04
  Speaker 1: Huh.
• 56:04
  Speaker 3: And I think that's also true with investing. You start
• 56:06
  Speaker 3: narrowing the misses. It's a way to get better.
• 56:08
  Speaker 2: Charlie Allis made the same argument with tennis. Most tennis
• 56:11
  Speaker 2: players lose because they make all these unforced errors. Other
• 56:15
  Speaker 2: than the pros, most of us would be better off
• 56:19
  Speaker 2: being less bad rather than trying to be more good,
• 56:23
  Speaker 2: if that makes any sense.
• 56:24
  Speaker 3: Absolutely, you can shave a lot of strokes doing that.
• 56:26
  Speaker 1: Yeah.
• 56:27
  Speaker 3: Yeah.
• 56:28
  Speaker 2: Final two questions, what sort of advice would you give
• 56:31
  Speaker 2: to a recent college grad interested in a career in
• 56:34
  Speaker 2: either investing or value or what have you?
• 56:39
  Speaker 3: Choose?
• 56:39
  Speaker 2: Your dad, Well, that certainly helps. I love what your
• 56:45
  Speaker 2: father said to you in terms of create future optionality
• 56:49
  Speaker 2: by studying and doing well in school. I've never quite
• 56:53
  Speaker 2: heard it phrase that way, but that really sums up
• 56:57
  Speaker 2: why do I have to study algebra? Because you were
• 57:00
  Speaker 2: just creating optionality.
• 57:02
  Speaker 3: Investing is about optionality and creating more options for yourself
• 57:06
  Speaker 3: down the road, and so anytime you can invest in
• 57:09
  Speaker 3: yourself and create additional options is a good thing to do.
• 57:13
  Speaker 2: Yeah. Say the very least and our final question, what
• 57:16
  Speaker 2: do you know about the world of investing, valuations, portfolio
• 57:21
  Speaker 2: management today that would have been useful when you were
• 57:25
  Speaker 2: first getting started twenty years ago or so.
• 57:28
  Speaker 3: Well, you know, we were talking about books earlier. I
• 57:31
  Speaker 3: personally think that the best book on personal finance is
• 57:36
  Speaker 3: The Psychology of Money by Morgan Housels. So if you
• 57:39
  Speaker 3: haven't read that, anyone that gets a bank accounts should
• 57:42
  Speaker 3: be required to read that and just internalize the concepts.
• 57:47
  Speaker 3: I know, if you've been in the industry a while.
• 57:48
  Speaker 3: Not all of it's new, but it's a lot of
• 57:50
  Speaker 3: It's a really good reminder on how you should behave
• 57:53
  Speaker 3: to create wealth over the long term for yourself.
• 57:55
  Speaker 2: Absolutely, Bill, thank you for coming in and for being
• 57:58
  Speaker 2: so generous with your time. We have been speaking with
• 58:01
  Speaker 2: Bill Miller the fourth. He is the chief investment officer
• 58:04
  Speaker 2: and portfolio manager at Miller Value Funds. If you enjoy
• 58:09
  Speaker 2: this conversation, well check out any of the six hundred
• 58:12
  Speaker 2: we've done over the past twelve years. You can find
• 58:15
  Speaker 2: those wherever you find your favorite podcasts, iTunes, Spotify, Bloomberg YouTube.
• 58:23
  Speaker 2: I would be remiss if I didn't thank the Cracked
• 58:25
  Speaker 2: team that helps put these conversations together each week. I'm
• 58:29
  Speaker 2: Barry Ridults. You've been listening to Master's in Business on
• 58:32
  Speaker 2: Bloomberg Radio